Ya got yer speed of sound. Ya got yer speed of light. And then, for all you Trekkies, ya got yer warp speed. In a recent FINRA public customer arbitration, the three arbitrators moved about as fast as possible to toss the case and recommend expungement. Once you read the facts, it's not that difficult to understand the motivation behind that rush to judgment.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in June 2015, former Lightspeed Trading, LLC customer, Claimant Ehrenspeck asserted unsuitable securities transactions; breaches of contract and fiduciary duty; fraud; churning; failure to supervise and to comply with internal procedures. and negligence in connection with unspecified securities. Claimant Ehrenspeck sought $507,227.63 in compensatory damages plus punitive damages, interest, costs, and reasonable attorneys fees. In the Matter of the FINRA Arbitration Between Robert Ehrenspeck, Claimant, vs. Lightspeed Trading, LLC, Mark Jonathan Melnick, and Derek Scott Schure, Respondents(FINRA Arbitration 15-01514, March 17, 2017).
Respondents Lightspeed, Melnick, and Schure generally denied the allegations and asserted various defenses. An expungement of the Central Registration Depository records ("CRD") of Respondent Schure was requested.
Dismissal at Warp Speed
After the completion of Claimant Ehrenspeck's case-in-chief, Respondents moved to dismiss. Notwithstanding Claimant's objection, the FINRA Arbitration Panel (which consisted of only "Public Arbitrators") granted the motions and denied Claimant's claims.
In recommending the expungement of Respondent Schure's CRD, the Panel offered, in pertinent part, the following rationale:
Respondent Lightspeed provided an automated trading platform for self-directed accounts and made no recommendations either as to transactions or strategies. Lightspeed named Schure on account statements sent to Claimant solely for the purpose of providing a contact person for technical matters. Schure had no involvement in Claimant's self-directed, option-trading, margin account. Schure had no contact with either Claimant or Respondent Melnick, Claimant's agent who traded Claimant's account under a power of attorney.
Therefore, the Panel finds that: the claims asserted against Respondent Derek Schure for losses sustained in Claimant's self-directed account were clearly erroneous and factually impossible; Schure was not involved in any of the alleged investment-related sales practices in issue; and, the claims alleged against Schure were false. The Panel recommends that the claims asserted against Respondent Derek Schure in this case be expunged.
Bill Singer's Comment
Lemme see here . . . Claimant Ehrenspeck had a self-directed account and had granted a power-of-attorney to Respondent Melnick. Schure was not involved in any of the relevant trading issues. Three independent public arbitrators concluded that the Claimant's claims against Schure were false.
One day, someone, anyone, will have to explain to me why someone in Schure's position doesn't sue the crap out of someone who files such a concoction of crap against him. Sure, I'm a veteran industry lawyer. I've represented public customer cases, defended the industry, and served on many arbitration panels. I know the drill. I understand the wisdom of turning the other cheek, arguing for dismissal, and seeking an expungement. On the other hand, geez, at what point, after you've been sucker punched, do you spit out that chipped tooth and the blood in your mouth and fight back? It's one thing to be mistakenly named in good faith by a truly victimized public customer; it's a whole other thing to become a punching bag in a shot-gun pleading.