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Defunct Broker-Dealer Loses No-Show Arbitration With Non-Lawyer
October 13, 2016
You know those jerks who always arrive for a meeting 30 minutes late or show up for the 7 p.m. dinner around 8 p.m.? With some folks, you make an appointment in advance and they show up at the appointed hour; for others, appointments are not commitments but merely aspirations. As a recent FINRA arbitration demonstrates, even an appointment as serious as a first arbitration hearing isn't always honored. Then again, life is filled with consequences.
Case In Point
Counterclaim
Respondent Barrett generally denied the allegation and asserted various affirmative defenses. Respondent filed a Counterclaim asserting unjust enrichment, breach of contract, failure of condition precedent, and prevention of performance. Counter--Claimant Barrett sought $25,000 in compensatory damages.
Non-Lawyer Or Not?
Yeah, I know, I can be a pretty demanding guy at times. On the other hand, I like to think of myself as a defender of the oppressed, a champion of the downtrodden, and a charming but irrepressible gadfly who is annoyingly persistent when it comes to asking and asking and asking the same question until I get an answer. In that light, let's start off with this disclosure in the FINRA Arbitration Decision:
REPRESENTATION OF PARTIESFor Claimant Newport Coast Securities, Inc.: Michael S. Colombo, StreetWide Asset Recovery Group, Inc., Hazlet, New Jersey.Respondent Matthew W. Barrett appeared pro se
Apparently, Respondent Barrett is going it sans-lawyer and representing himself.
On the other hand, just what the hell is "StreetWide Asset Recovery Group, Inc."? Is that the authorized corporate representative of Claimant Newport Coast Securities? Further, is "Michael S. Colombo" of StreetWide a lawyer? I don't see "Esq." appended to his name. Frankly, the omission of some of that detail strikes me as a lack of quality control by FINRA.
Requested Postponement
FINRA Code of Arbitration Procedure For Industry Disputes Rule 13602. Attendance at Hearings provides in pertinent part that:
(a) The parties and their representatives are entitled to attend all hearings. Absent persuasive reasons to the contrary, expert witnesses should be permitted to attend all hearings.
As such, it would appear that corporate parties may be represented at FINRA arbitrations by non-lawyer corporate representatives. On the other hand, non-lawyer representatives often set off a whole host of "Unauthorized Practice of Law" concerns. This issue is well known to FINRA, as evidenced by this portion of the organization's online "Frequently Asked Questions" concerning the filing of arbitration claims:
In furtherance of the issues presented by non-lawyer corporate representatives, consider In the Matter of the FINRA Arbitration Between Robert W. Ralston and Susan B. Ralston, Claimants, vs. Syndicated Capital, Inc. and Paul H. Heckler d/b/a Yosemite Capital Management, Respondents (FINRA Arbitration 10-02276, July 7, 2011). In this arbitration, the following representations were noted:8. Do I need a lawyer for arbitration?FINRA rules do not require parties to be represented by attorneys. Parties may appear without attorneys. Effective December 24, 2007 a party may be represented by a non-attorney, unless state law prohibits such representation, the person is currently suspended or barred from the securities industry in any capacity, or the person is currently suspended from the practice of law or disbarred. Please be aware that representation by a non-attorney might be considered to be the unauthorized practice of law in some jurisdictions, so please check with the relevant State Bar (or similar organization) for more information. FINRA Dispute Resolution staff members are often asked to make recommendations or referrals regarding legal representation. In our capacity as impartial administrators of this alternative dispute resolution forum, rather than specific recommendations, we've provided some general information on obtaining legal assistance in our How to Find An Attorney section of our website.
Claimants Robert W. Ralston and Susan B. Ralston were represented by Martin B. Greenbaum, Esq., Greenbaum Law Group, LLC, Newport Beach, California; and Ronald E. Miller, Loss Recovery Center, Inc., Reno, Nevada.Respondent Syndicated Capital, Inc. was represented by Thomas Rittenburg, Esq., Lewis Brisbois Bisgaard & Smith LLP, Los Angeles, Califomia.Respondent Paul H. Heckler d/b/a Yosemite Capital Management was represented by Sylvia M. Scott, Esq., Freeman Freeman & Smiley, LLP, Los Angeles,California.
As explained in "Claimants' Non-Lawyer Representative Muzzled By FINRA Arbitration Panel" (BrokeAndBroker.com Blog, July 13, 2011), during the above-cited Ralstons v. Syndicated Capital, Inc. FINRA arbitration, the following motion practice occurred:
Non-Lawyer RepresentativeAt the commencement of the evidentiary hearing held on June 6, 2011, before opening statements, counsel for both Respondents orally moved for disqualification of Claimants' representative Ronald E. Miller of the Loss Recovery Center, Inc., Reno, based upon his status as a nonlawyer.Following deliberations, the FINRA Arbitration Panel ruled that Miller:
- would be allowed to examine Claimants' witnesses, but
- would not be allowed to examine the Respondents or Respondents' witnesses.
Note that the only representative listed for Newport Coast Securities v. Barrett is Michael Colombo, who may or may not be a lawyer.
The Newport Coast Securities v. Barrett FINRA Arbitration Decision regales us with a lovely tale about Claimant seeking to reschedule a hearing but waiting until the morning of the hearing to seek the postponement. As set forth in the Decision:
Claimant Newport Coast Securities asserts through it representative Colombo that it was "trying to get replacement counsel" as late as the day before the first scheduled hearing. Replacement counsel? There is no disclosure in the Decision of legal counsel to start with, unless that was Colombo, which, yet again, raises the seminal question of whether he is a lawyer.On September 27, 2016, the day of the first scheduled hearing, Claimant requested postponement through its representative, Mr. Colombo, due to a "scheduling conflict with their lawyer." The Claimant apologized for the late notice but until yesterday "they were still trying to get replacement counsel."
Not surprisingly, our pro se Respondent objected to Claimant's last-minute attempt to postpone the arbitration hearing. As more fully presented in the FINRA Arbitration Decision:
Not a bad objection. That revelation about Claimant Newport Coast Securities having gone out of business after filing its Statement of Claim was a stunner.Respondent objected on the grounds that the Claimant through its representative, Mr. Colombo, had agreed to the hearing dates back on April 20 during the Initial Pre-hearing Conference, had been duly notified of the date, time, and place of the hearing and no other representative had at any time entered an appearance. He observed that Newport Coast Securities Inc.'s CRD indicated that it was now "out of business." He indicated that he was currently employed and that his time was being wasted by the Claimant's failure to appear.
Then there was the guts of Respondent's objection; namely, that the parties had agreed on April 20, 2016, to the first hearing date of September 27, 2016, which means that the parties and Arbitrator had set the first hearing about five months earlier. According to Respondent's objection to the motion to postpone, no other representative other than Colombo had ever entered an appearance. Yet again, I ask, how do you replace a lawyer if none had ever entered an appearance -- unless, of course, Colombo is a lawyer but, once more with gusto, we don't know that because the Decision doesn't say.
By way of a public service for Claimant, in case the concept of "showing up on time" baffles you, please watch the video below for some pointers:
Calling Mr. Colombo
In dealing with the motion for and the objection to postponement, the FINRA Arbitration Decision explains that:
Seriously? Claimant's representative is supposed to be in a FINRA Arbitration hearing room but, instead, he is on a conference call and won't engage with the FINRA Arbitrator. To be fair, Mr. Colombo did indicate that he "might" be available later in the morning around 11ish. Not saying that I will but it's a possibility . . . a maybe.Mr. Colombo was contacted by FINRA and was afforded an opportunity to reply to Respondent's objection telephonically but declined to do so indicating that he was on another conference call and that he "might be available at 11:00 a.m."
Postponement Denied
I suspect that you too have an inclination as to how this is going to end. As the Decision states:
The postponement is denied for lack of good cause shown. No previous postponement had been requested. However, the postponement request was made in an ex parte email to FINRA and at almost literally the last minute. The Arbitrator and Respondent were not made aware of the request until after the appointed time for the hearing and only through efforts to contact Mr. Colombo in the event that he had been delayed on the way to the hearing.Respondent was present at the hearing and ready to proceed. Claimant's request is without merit insofar as Claimant cited only an unspecified scheduling conflict and did not indicate whether the conflict was Mr. Colombo's or another attorney of the Claimant who had not entered an appearance. It must be noted that no witness list was filed by either party and in a telephone conversation with FINRA regarding this matter, the Case Administrator confirmed that Claimant had received the hearing notice (which had been agreed upon during the Initial Pre-hearing Conference) and that Mr. Colombo confirmed that he was prepared to go forward at the scheduled time.
Award
The sole FINRA Arbitrator denied Claimant's Claim and Respondent's Counterclaim.
Bill Singer's Comment
StreetWide brings to the table 26 years of experience in securities industry related collections. Over the course of his career, Michael Colombo, President of StreetWide, has worked closely with both FINRA dispute resolution and the NYSE enforcement and arbitration divisions. He has a proven track record of settling 90% of collections cases before they reach the arbitration stage and a history of recovering an average of 80 to 90 cents on the dollar.Michael has collected successfully "in-house" for firms such as Paine Webber, Gruntal and Co. and GKN Securities. With StreetWide, Michael has established business relationships with and has collected successfully for top tier firms such as Legg Mason Wood Walker, Inc. , Raymond James and Associates, Inc. , Paine Webber, Inc., Morgan Keegan and Co., Inc., Merrill Lynch, Wachovia Securites, MetLife Securities, Harris Investor Services/CSFB, and Ryan Beck and Co, Inc. and Pershing, LLC in addition to FINRA.Thanks to the expertise of Michael and his staff, all industry experienced professionals, StreetWide can lower the legal expenditures for a securities firm up to 70% by working diligently to collect what is owed in a swift and professional manner. StreetWide can offer you the industry knowledge you demand and a focus that is unmatched.StreetWide is a collection agency that works solely in the financial services sector. We specialize in the recovery of securities and securities-fraud related debt from a wide array of sources.
Newport Coast Securities BrokerCheck Records
Online FINRA BrokerCheck records for Newport Coast Securities disclose under the heading "Regulatory - Final" 10 events dating back to 1997.
Under the BrokerCheck heading of "Arbitration Award - Award/Judgment" are two customer arbitrations filed in 2015 and one in 2012; and the awards rendered by the arbitration panels were $300; $106,016.01; and $45,860.01.
BrokerCheck further discloses that Newport Coast Securities terminated/withdrew its registration on July 26, 2016, at a time when the firm was purportedly under Net Capital. The online records assert that the firm had:
[T]OTAL AMOUNT OWED TO CUSTOMERS, FROM PENDING AND AWARDED ARBITRATIONS, IS $220,628. . ."
Finally, under the BrokerCheck heading "Regulatory - Final" is the disclosure that on September 6, 2016, FINRA cancelled the firm's membership when it failed to pay $74,141.21 in FINRA fees.
Matthew Barrett BrokerCheck Records
Online BrokerCheck records for Matthew Barrett disclose that he was admitted to practice law in Massachusetts in 1991 and indefinitely suspended in September 1999 for allegedly misusing client funds. The online disclosure asserts that the suspension was only first reported to the Central Registration Depository by Barret in July 2004, nearly 5 years after it was ordered. In October 2014, Barrett applied for registration as a broker-dealer agent in Massachusetts with Newport Coast Securities and pursuant to a November 2014 Consent Order, he was registered subject to undertakings and representations to be effective for 18 months.
Oooooooooooooooh my aching head!
A corporate representative who doesn't appear to be a lawyer sends an email asking for a postponement of an arbitration hearing in order to get replacement legal counsel when no prior legal counsel seems to have appeared but the representative is too busy on a teleconference to argue his motion to postpone.
A pro se respondent was once admitted to the practice of law but subsequently suspended.
A claimant former employer sues a former employee for damages arising from something never explained and the Claimant goes out of business after filing its claims.
Never a dull moment with FINRA arbitrations!