August 31, 2017
It is a lonely life that the
BrokeAndBroker.com Blog's publisher Bill Singer, Esq. leads.
Day in and day out he reads whatever gets posted on the various website press
pages of the FBI, the Department of Justice, the SEC, FINRA, NASAA, and several
other court and regulatory organizations. At times, it's a flood of filed
complaints, motions, orders, decisions, and opinions. Other times, it's little
more than the electronic drivel of the Internet Age.
other day, the Financial Industry Regulatory Authority posted an arbitration
decision. The underlying case involved the expungement request of a former
Wells Fargo employee. She represented herself. Wells Fargo opposed her
requested relief. Three FINRA arbitrators heard the case and issued their
Decision, which took away Bill's breath. It brought
tears of joy to his eyes. It was so stunning and so beautiful a bit of
presentation and explanation that Bill drafted this article. And then it gave
Bill pause. What if this was the future of things to come? What if FINRA had
finally grasped the concept of including sufficient content and context in its
published decisions? What if nothing issued by FINRA warranted a criticism or
critique? Omigod . . . what would Bill do if there was nothing left for him to
And then, Bill calmed down. There would always be something for
him to complain about. Life was, indeed, good. The Universe had been restored
to equilibrium. Of course, don't get too complacent because we should all be worrying about those recent news
stories concerning radio waves emanating from deep, dark, unknown space. When they
finally decipher those messages, Bill will be ready to criticize and critique the
aliens' lack of content and context. The battle goes on. The fight will
Case In Point
In a Financial
Industry Regulatory Authority ("FINRA") Arbitration Statement of
Claim filed in October 2016 by former Wells Fargo Advisors' employee Claimant
alleged wrongful termination and defamatory/inaccurate reporting on her Central
Registration Depository records ("CRD"). Representing herself pro se, Claimant
sought the expungement from her CRD and Uniform Termination Notice
of Securities Industry Registration ("Form U5") of her former employer's remarks
about her alleged violation of company policy. In the Matter of the FINRA
Arbitration Between Kum Hee Kang, Claimant, vs. Wells Fargo
Advisors, LLC, Respondent (FINRA Arbitration # 16-03073,
August 24, 2017).
Respondent Wells Fargo Advisors
generally denied the allegations and asserted various affirmative defenses.
Pointedly, Respondent requested the denial of Claimant's expungement request.
In pertinent part, the FINRA
Arbitration Panel provided the following commentary in the FINRA Arbitration
This is an intra-industry expungement-only case that presents an unusual twist.
Claimant does not seek to remove a CRD entry so much as she seeks to "remove"
its allegedly misleading effect by adding language to clarify the reason for
her termination by Respondent Wells Fargo.
Claimant was a FINRA-registered
private banker at a Wells Fargo branch in metro Atlanta whose job was to handle
business accounts for customers. The branch had a customer whose fiduciary
business required opening and maintaining multiple bank accounts, sometimes on
a rush basis. The customer maintained over 200 such accounts at the branch. For
some time, the branch practice was to open such accounts if necessary by
filling out paper account opening "kits" for the customer at his behest without
the customer's presence at the branch. The customer would sign the necessary
documentation later. This procedure was contrary to Respondent's policy that
customers must be present in the office when opening an account to accept the
about April 16, 2016, the customer wanted over 20 accounts opened right away
but was unable to be present in the branch, which temporarily had run out of
paper kits. Respondent had a procedure to generate account documents
electronically, which allowed account disclosure documents to be emailed to the
customer, who upon receipt and reading would electronically "agree" to the
terms by activating the appropriate email button. To open an account this way,
the system required population of a field for the customer's email address; disclosures
would be sent to that address; and the customer's "agreement" registered with
the system. Without the customer's email address and agreement, the system
would not allow an account to be opened. Because on April 16, 2016, the
customer stated that he was too busy to open these new rush accounts, and in
any event had seen the documents many times and considered it a waste of his
time, the branch manager, Claimant's superior, authorized opening these
accounts by populating the field with Claimant's and another employee's own
Wells Fargo email addresses and electronically accepting the terms on the
customer's behalf so that the accounts could be opened that day. The customer
was to come in soon and physically sign the documentation printed out by the system
for each account and receive paper disclosures. Claimant and the other branch
employee opened the 20+ accounts as the branch manager authorized.
By doing so, these individuals
violated clear Wells Fargo policy and federal requirements, upon which they all
had been trained. When Respondent Wells Fargo discovered this infraction, all
three employees were terminated, again following policy for such infractions.
Since Claimant is
FINRA-registered, Respondent Wells Fargo completed a Form U5 noting the
termination and the reason for it, as required by FINRA rules. In relevant
part, the entry reads: "Ms. Kang sent a bank customer's electronic new account
kit disclosures to her own Wells Fargo email address, and accepted the
disclosures online for the bank customer." This information was then reflected on
Claimant's permanent CRD record, which is available to the public.
While we find the CRD entry to be
true as far as it goes, it is not the whole truth and as a result conveys a
false implication that Claimant acted underhandedly or with ill intent in
opening these accounts as she did, which we do not find to be the case. The
entry, as it stands, damages Claimant's reputation in the securities and banking
industries and is thus defamatory. Respondent Wells Fargo raised defenses of
truth and privilege, and while these are defenses to its liability, its
liability is not an issue in this case. We are solely concerned with the
overall accuracy of the CRD entry, and the only remedy sought is an addition of
language more fully describing the circumstances so as to remove the present
implication suggesting dishonesty.
2. Accordingly, the Panel
recommends the amendment of the registration records for Claimant Kum Hee Kang
(CRD # 6403749) maintained by the CRD based on the defamatory nature of the
information. The Panel recommends that the Form U5 filed by Respondent Wells
Fargo on September 20, 2016, be amended by adding the clarifying language "to
accommodate the customer's wishes and with the knowledge of and as authorized
by her superior." to the last sentence of the Termination Explanation in
Section 3 and to the answer to Section 4 of the Termination Disclosure
The Reason for Termination shall
remain the same. . .
As readers of the
BrokeAndBroker.com Blog know -- perhaps all to well -- I am
a frequent critic of FINRA Arbitration Decisions because
they too often lack sufficient content and context. As such, with a great deal
of respect, with a great deal of admiration, with a feeling that I have seen
perfection and may never again cast my gaze upon such a complete work of
beauty, I applaud this towering bit of wordsmithery from the three FINRA
arbitrators. Great job! Stupendous!! I am awed.
Arbitrators clearly explained to us what prompted this mess: a customer whose
fiduciary business entailed maintaining over 200 bank accounts at the branch needed accounts opened on a rush basis. No, this was not a single mom's account. No, this was not a joint account for a husband
and wife. Yes, this was a complex account that, in reality, required the opening of
many sub-accounts and needed them opened quickly. Consequently, we can only
imagine how valued this fiduciary business' account was for the branch and how
every step was taken to keep this client happy. In attempting to go the extra
mile in terms of customer service, the Wells Fargo branch violated the firm's
policy that customers had to be physically present in the office for account
On that fateful April
16, 2016, the fiduciary-business customer needed 20 accounts opened ASAP but the customer was unable to make the trip to the branch and that office had
"run out of paper kits." The Wells Fargo branch's
standby procedure was to generate documentation electronically but requiring an
email electronic agreement reply from the customer. Nice back-up plan but for
the fact that this particular customer was too busy to bother filling in the forms and doing that whole email review-and-reply thing. As he likely put
it: Been there,
done that, seen those forms before -- don't need to waste my time. Fill in
the blanks for me.
Faced with getting accounts open with an unavailable but frequent-flyer client, not having on hand the necessary forms, and not wanting to jeopardize a valued account, branch staff accommodated the customer. Unfortunately, the way the accomodation was extended violated Wells Fargo
policy and various federal regulations. Everyone knew
that customer service had sort of crossed over the line. Then again, no one
likely wanted to risk angering this particular client and losing a couple of
hundred accounts. That explanation doesn't make the misconduct right. It simply
ensures that we all acknowledge the motivation behind what happened.
To the FINRA Arbitrators'
credit, they refused to be suckered in by Wells Fargo transparent and clearly
self-serving memorialization of Kang's reason for termination. As so fairly
and intelligently stated by the
While we find the CRD entry to be true as far as it
goes, it is not the whole truth and as a result conveys a false implication
that Claimant acted underhandedly or with ill intent in opening these accounts
as she did, which we do not find to be the case. The entry, as it stands,
damages Claimant's reputation in the securities and banking industries and is
thus defamatory. Respondent Wells Fargo raised defenses of truth and privilege,
and while these are defenses to its liability, its liability is not an issue in
this case. We are solely concerned with the overall accuracy of the CRD entry,
and the only remedy sought is an addition of language more fully describing the
circumstances so as to remove the present implication suggesting dishonesty.
We should all recall that in the not-so-distant bit of painful regulatory misconduct
involving Wells Fargo Bank and its subsidiaries and a couple of million
unauthorized account openings and a $185 million fine. By way of refresher, the
Consumer Financial Protection Bureau's Consent
Order cited the relevant period for that fiasco as running from
January 1, 2011, to September 2016. READ the CFPB Wells Fargo Consent Order. That tawdry history of unauthorized account openings cuts both ways. On the one hand, Wells Fargo comes off more than a bit sanctimonious and hypocritical in its harsh characterization of Kang's conduct. On the other hand, at some point Wells Fargo has to get religion and it seems to have found the regulatory gods sometime around April 16, 2016.
In closing, disaffected former employees should take note that not all expungement applications need be premised upon deleting words, sentences, or paragraphs. In some cases, more is less -- that is, more explanation may present your conduct in a less negative light. Also, take note that no high-priced lawyers were involved in this expungement proceeding. Kang did it all by herself.
Rule 2080: Obtaining Customer Dispute
FINRA Rule 2081: Prohibited Conditions Relating to
Expungement of Customer
FINRA Rules 12805 and 13805: Expunging
Customer-Dispute Information Under Rule