April 16, 2016
Wall Street's rules and regulations generally take the form of prohibitions. For some industry members, however, prohibitions are viewed as challenges. The ideas and schemes that folks come up with to get around the various regulatory and compliance barriers are quite often breathtaking and ingenious. For those miscreants who are unsuccessful in circumventing thethou-shall-nots of the biz, their failures are often jaw-dropping and comical. Consider the efforts of an HSBC registered representative in a recent FINRA regulatory settlement.
Many things get swept under the phrase "personality differences with management." Generally, you start with the premise that most or all bosses are jerks and that takes you to the belief that most or all employees are idiots. From that volatile mix of ingredients we shake or stir a cocktail that prompts lots of employment based litigation. If the boss has the proverbial hard-on for you, you may find your good name defamed via lousy references or retaliatory regulatory filings. What was legitimately a personality difference suddenly morphs into allegations against you of fraud, dishonesty, hostile workplace, and all sorts of other fabrications of the truth. When time passes and an employee tries to get the nastiness removed, he or she may find that the former firm is still angry and not disposed to any concession. Consider a recent FINRA arbitration in which a former E*Trade employee seeks an expungement of his Form U5.
The preamble to the "Broker Protocol"states the following:
The principal goal for the following protocol is to further the clients' interests of privacy and freedom of choice in connection with the movement of their Registered Representative ("RRs") between firms. If departing RRs and their new firm follow this protocol, neither the departing RR nor the firm that he or she joins would have any monetary or other liability to the firm that the RR left by reason of the RR taking the information identified below or the solicitation of the clients serviced by the RR at his or her prior firm, provided, however, that this protocol does not bar or otherwise affect the ability of the prior firm to bring an action against the new firm for "raiding." The signatories to this protocol agree to implement and adhere to it in good faith.
As with many efforts to reach any industry-wide consensus, the Broker Protocol often succeeds but also has its moments of failure. Similarly, while the goals of the member firm signatories are often met by the terms of the Protocol, the desires of the hundreds of thousands of subject men and women registered reps are not always satisfied. Pointedly, many chafe at the upfront admonition that the Protocol was designed to best serve clients privacy rights and freedom of choice. Critics would argue that the Protocol is merely another arrow in the quiver of management to be used against disgruntled labor. In essence, the bosses dictate the terms by which the employees can come and go. Whatever your allegiance and preferences, consider how the Protocol came into play in a recent industry arbitration.
For some reason, Hollywood believes that bank employees are more honorable and law-abiding than their counterparts at brokerage firms. Think of it as the competition between the fictional George Bailey in "It's a Wonderful Life" versus the fictional Gordon Gekko in "Wall Street" or the real-life Jordan Belfort in "The Wolf of Wall Street." In truth, however, we got bad guys in all walks of life. The brokerage industry has no monopoly when it comes to moral turpitude in the financial industry: we got crooks and lowlifes among the ranks of bankers, insurance agents, and investment advisors. Consider this recent regulatory settlement involving a bank Branch Manager.