Abuse And Harassment On Wall Street

January 25, 2018

BrokeAndBroker.com Blog publisher Bill Singer, Esq. is troubled by a recent FINRA regulatory settlement. The facts of the matter are cringe-worthy. Frankly, it all adds up to some moron stockbroker posting an online sexual solicitation in what seems to be a misguided effort to retaliate against another stockbroker. It's the stuff that should get someone sued. It may even be the stuff that should prompt an employer to fire you. Beyond the civil lawsuit and the firing, is this also a subject for Wall Street regulation replete with fines, suspensions, or bars? Bill's not saying he has the answers. Bill is saying that he has some provocative questions.

Case In Point
 
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Paul Martin Betenbaugh submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Paul Martin Betenbaugh, Respondent (AWC 2016051672301, January 23, 2018).

The AWC asserts that Betenbaugh entered the industry in 2006 and "has no relevant disciplinary history." The AWC does not name either of the two FINRA member firms where Betenbaugh was registered during his time in the industry. 

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I try my wordsmithery best to take the mundane settlements and decisions from Wall Street's regulatory community. and punch them up into a fabulous, compelling tale. Not this time. No. Nope. No way. Today, I am going to let a FINRA AWC speak to you in all its glory through this pertinent part:

FACTS AND VIOLATIVE CONDUCT

FINRA Rule 2010 requires that associated persons "in the conduct of [their] business, shall observe high standards of commercial honor and just and equitable principles of trade." Rule 2010 articulates a broad ethical principle that applies to all business-related misconduct, regardless of whether the misconduct involves securities. Harassing and abusive conduct violates the broad ethical principle encompassed in FINRA Rule 2010.

On September 19, 2015, September 24, 2015, and October 1, 2015, Betenbaugh posted internet ads impersonating a competing registered representative and soliciting men for sexual encounters. All the posts listed the competing registered representative's business cell phone number as the contact number. As a result, the competing registered representative received phone calls and text messages on his business cell phone in response to the ads Bettenbaugh posted.

Sanctions

In accordance with the terms of the AWC, FINRA imposed upon Betenbaugh a $7,500 fine and a three-month-suspension from association with any FINRA member firm in any capacity 

Bill Singer's Comment

Online FINRA BrokerCheck records as of January 25, 2017, indicate that Betenbaugh was registered from November 2006 to February 2016 with FINRA member firm Edward Jones,and from March 2016 to September 2017 with FINRA member firm Securities America, Inc. Why the AWC felt it a top secret bit of information to not disclose the employer firms is beyond me but, oh well, I've broken the confidential code.

Among the many, many questions that come to mine is just what the hell was going on between Betenbaugh and the "competing registered representative" that prompted the Respondent's inane online ad? Were these two guys competing for business at Edward Jones and more than a bit of bad blood had developed between them -- or was the other rep at another firm? 

While I'm working my way through the motivation for Betenbaugh's nonsense, I can't help but notice that posted his ads in 2015 and that this is 2018 and, well, like what the hell took over two years for FINRA to detect and settle? Which then prompts me to wonder how FINRA even came across this issue and how the self-regulatory-organization traced everything back to Betenbaugh.

I wish that FINRA had shared its sleuthing tips with us so that Wall Street's many in-house compliance staffers could arrive at work this morning and get right to work on reading thousands of online sex-solicitation ads. Of course, now that I think of it, who's going to come to work and try to figure out which of the industry's compliance staff is posting similar sex ads? Which prompts another thought -- yes, my mind goes into overdrive with this critical investor protection stuff -- who at FINRA is logging online to see which of the self-regulator's staff is posting online solicitations for sex?

If abusive and harassing online posts not involving a public customer or a securities transaction trigger FINRA's rule about conduct inconsistent with high standards of commercial honor and just and equitable principles of trade, then who at the self-regulator makes the determination as to what is abusive or harassing? Is this really the stuff of Wall Street regulation? Before you're too quick to offer your opinion, let me pose a few fact patterns to you:
  • You're an ardent Philadelphia Eagles fan or just someone who really, really hates the New England Patriots and just because you have far too much time on your hands and not enough blood flowing into your brains, you post ads online soliciting men for sexual encounters but you list "Tom Brady" or "Bill Belichick" as having posted the ad. 
  • You work for Starbucks and you're really pissed off at another barista who didn't show up for his shift and you had to work a double. You post the exact same online ads as did Betenbaugh using your no-show co-worker's name. 
  • You're a politically active individual with a daily axe to grind and you post the exact same online as ads as did Betenbaugh but under the names of either "Donald Trump" or "Chuck Schumer" in order to make what you think is a political protest. 

  • ESPN anchor Jemele Hill posted this tweet in September 2017: "Trump is the most ignorant, offensive president of my lifetime. His rise is a direct result of white supremacy. Period."
  • You're President Donald Trump and you post this Tweet: ""Even Crazy Jim Acosta of Fake News CNN agrees: 'Trump World and WH sources dancing in end zone: Trump wins again...Schumer and Dems caved...gambled and lost.' Thank you for your honesty Jim!""
So . . . now, give me your opinion. Should all of the above posters be deemed to have engaged in abusive or harassing speech by a quasi-governmental or governmental regulator? In Jemele Hill's case, beyond any suspension that her employer ESPN imposed, should, for example, the Federal Communications Commission fine and suspend her? Should the FCC call for the impeachment of President Trump because he referred to a news anchor as "Crazy?" Yes, you're correct . . . Hill and Trump did not post online sex solicitations but FINRA's premise for regulatory action was that it viewed Betenbaugh's online content as abusive or harassing. In the first three examples cited above, would you support governmental action against the Eagles fan, the Starbucks barista, and the political activist -- and note that I'm only asking about intervention by the government.

I raise questions about FINRA's involvement in bringing regulatory charges against Betenbaugh but I do not defend or in any way excuse Betenbaugh's conduct. Personally, I find Betenbaugh's conduct to be offensive and likely homophobic. If his employer fired him, so be it. If the victim of the online ads want to sue Betenbaugh, have at it. I am merely pondering the limited issue of FINRA's jurisdiction and role in a matter that does not involve securities transactions or public customers. 

My concern is how to delineate that line between where, on the one side, an employer has the discretion to fire you and a victim of your conduct has the right to sue you, and, on the other side, where a quasi-governmental Wall Street regulator has the right to fine, suspend, and perhaps bar you. As I've often noted and will do so again, in my opinion, FINRA is little more than a glorified trade organization in which employer/member firms have arrogated to themselves the sole power to approve rules and to elect individuals for the Board and other offices. Employees/associated persons have no vote on anything at FINRA. All of which moves me to call FINRA a "lap dog" of its large firms. When I see a case in which FINRA fines and suspends an employee/registered person for abusive and harassing online content, I am always troubled as to whether the same standards will be similarly applied to the abusive and harassing conduct of FINRA's firms and those firms' management. Similarly, when I see FINRA in a lather over an online ad soliciting male sex, I wonder why the self-regulatory-organization isn't so swift to investigate and prosecute sexual harassment and discrimination against the industry's females.

I would direct those pious and righteous FINRA sleuths to veteran journalist Susan Antilla, whose opening lines in "How Wall Street Silences Women" (The Intercept, December 12, 2017) https://theintercept.com/2017/12/13/wall-street-women-gender-financial-sector/ are

AMONG THE BUSINESS sectors largely absent from the current deluge of sexual harassment revelations is the financial services industry, a behemoth that employs 3.2 million people in the United States and is infamous for abuse and discrimination targeting women.

New data suggests that, along with Hollywood, the media, and the restaurant industry, finance might deserve a new turn under the hot lights. A new report from the Government Accountability Office finds that women have made no progress increasing their ranks in management in the financial industry since 2007, with women in New York, home to Wall Street's power center, faring worst in the country.

Also, while FINRA is looking for examples of abusive and harassing conduct, take a gander at  "What it will take to end sexism on Wall Street" (Marketplace, November 7, 2017) https://www.marketplace.org/2017/11/07/business/when-it-comes-sexism-wall-street-change-may-be-underway. Veteran Wall Street executive Sally Krawcheck was interviewed in that article and she alleges, in part, that:

"I tell you, it's really interesting when there's a Xerox copy of male genitalia on your desk," Krawcheck said. "It takes you a minute to realize what it is." 

That wasn't the last time Krawcheck experienced harassment. She recounted another episode in a #MeToo blog post from October, following the firing of Harvey Weinstein after multiple sexual harassment allegations. Marketplace host Kai Ryssdal called up Krawcheck to better understand how this moment is playing out on Wall Street. The following is an edited transcript of their conversation.

Kai Ryssdal: You were young and inexperienced when [the Xerox incident] happened. You didn't know what to do. That was not the last time, though, that you had uncomfortable experiences in your professional career.

Sallie Krawcheck: Not even close.

Ryssdal: And in point of fact, it came, as you wrote in your post, when you were older and had a lot of power. Or more power, anyway.

Krawcheck: Yeah. And that's what a difference is between where I was fortunate enough to be, and some of these young women we're hearing about in Silicon Valley and Hollywood, that they were preyed upon when they were trying to make it in their industry and hadn't had a level of success. Happily for me, when I had a very senior, very well-known, powerful individual make a pass at me, he wasn't my boss. So this was at the Sanford Bernstein Strategic Decisions Conference. I was the director of research. I went up afterwards to this very well-known, powerful individual. Thanked him for joining us, and he turned to me and said, "Would you like to come up to my hotel room?" And then [made an obscene gesture with his mouth]. I can't imagine that worked very well for many people. But happily, I was in a position where I could say no to him, and he could not impact my job. Even more happily, several years later, when I was the chief financial officer of Citigroup, our CEO wanted to offer him a job there.

Ryssdal: This guy, the same guy?

Krawcheck: This same guy. And I went into my CEO's office, and I said, "Please don't hire him. Here's the story." He said, "I'm going to hire him anyway." And I said, "OK. Your decision. If you do, my decision: I'm going to quit, and I'm going to tell everybody why I quit. Because he'll be a predator here." My boss sorta [said,] "Whoa, OK." And didn't hire him. So what this guy doesn't know: He cost himself, but through me, millions and millions and millions and millions of dollars. . .

In conclusion, to my friends and enemies at FINRA, if you want to be taken seriously, you can't be so selective in the targets of your regulatory zeal. Now that you've brought your cross-hairs on the likes of Betenbaugh, how about you get serious and investigate far more damaging acts of abuse and harassment that daily harm the hundreds of thousands of women on Wall Street?  Show me that Betenbaugh is a prelude to a more serious effort to reform Wall Street.  On the other hand, mind your place. You're not the Thought Police. We don't want a Big Brother.