September 15, 2018
Today's BrokeAndBroker.com Blog presents two Deutsche Bank Securities registered representatives with decades of industry employment. In a FINRA arbitration, the reps alleged that Deutsche Bank Securities had filed inaccurate, defamatory regulatory disclosures about purported customer complaints. Tempers must have been heated because the combined damages sought by the reps were over $10 million. When the awards were announced by the arbitrators, Deutsche Bank may have wished it had opted to settle. Then again, if the Claimants refused to come down from their $10 million demand, the employer's decision to litigate to the bitter end may have had merit.
Let's be clear. The only thing that happened here is that the US Subsidiary complained to Merrill management that Due Diligence had not conducted a fair review of the New Team, and Merrill accommodated that complaint by granting more time. Both the complaint and the response were perfectly reasonable, because on the very face of it Due Diligence had not conducted a fair review. Due Diligence recommended terminating the Products because "the New Team had previously been responsible for institutional accounts with a minimum of $100 million invested in diversified portfolios of approximately 150 bonds whereas the Products were historically held in retail accounts with a minimum of $100,000 invested in portfolios of 20-25 bonds." Which is something like saying "You're not competent to play in the Minors because all you've ever done was pitch for the Yankees." Really?
Yet again, FINRA has the opportunity to do right by the hundreds of thousands of registered men and women. Yet again, the plight of the little guy is barely a concern for Wall Street's self-regulatory-organization. In today's installment of yet another rant by BrokeandBroker.com Blog's publisher Bill Singer, we come across one of the few remaining drips and drabs of the last decade's auction rate securities meltdown. By now, the autopsy results have long been known. The auction market locked and froze amid the loss of liquidity. What was sold as "good as cash in the bank" was not. The "never happen" event of no bids happened. Long after the finger pointing ceased, the conclusion was that the blame for customers' losses was on the originators of this flawed product and not the stockbrokers. Faced with those facts, FINRA still requires stockbrokers to run the gauntlet of filing an arbitration Statement of Claim and incurring all the attendant filing fees and litigation costs. ARS expungement arbitration? Why hasn't the ARS expungement application been placed squarely within the regulatory pipeline where it truly belongs? Why isn't FINRA-the-self-regulator reviewing ARS expungement applications on an expedited basis, at no cost to the stockbroker (charge the responsible broker-dealer for all I care)? Why does the concept of "justice" seem so elusive at FINRA when it comes to doing right by the industry's men and women?
On Wall Street, not every angry communication from every unhappy customer is supposed to be viewed as a formal Complaint against a stockbroker. Sometimes customers are upset about with the policies of their brokerage firm. The customers don't like the commission schedule or the amount of a margin charge or the 20 minute wait on the customer service line or the frequent outages on the trading platform. It's not always a sales practice issue involving misconduct by a stockbroker. Unfortunately, the way things get handled at Wall Street's compliance departments is to take the path of least resistance and deem any expression of dissatisfaction from any customer as a reportable Complaint, which gets disclosed on the record of any stockbroker who may have had any contact with the sender. In a recent FINRA expungement arbitration, we witness how an assembly line approach to regulation and compliance imposes an unfair burden on a stockbroker who was merely following her firm's orders. It all takes on the appearance of a drive-by shooting with the stockbroker an unintended bystander victim.