October 19, 2018
A recurring theme in the BrokeAndBroker.com Blog is the manner in which seemingly sensible, reasonable, and intelligent settlements of disputes just don't quite make it across the old finish line. As a lawyer, I've had clients prod, press, and push me to get a messy dispute settled. After I hammer out the terms, my client agrees to pay or to accept $X by a specific date. Some would think that such a milestone is the end of the process. A veteran lawyer such as me knows it's often only the beginning -- if even that. At some point, the excuses start:
The commission check that I was expecting didn't come in.
My grandmother died.
My house burned down.
I needed emergency hernia surgery.
The bank lost my deposit.
The bank erroneously closed my account.
Without further ado, let me present today's FINRA regulatory settlement involving a customer complaint that an enterprising stockbroker took it upon himself to settle quietly, without involving his employer broker-dealer, and, go figure, the customer settlement didn't quite settle, which prompted FINRA to investigate, and that prompted yet another settlement, this time a regulatory one.
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, Jose Luis Paula, submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Jose Luis Paula, Respondent (AWC 2017055832401, October 4, 2018).
Paula was first registered in 2010 with FINRA member firm NYLife Securities LLC ("NYL" ). The AWC asserts that "Paula has no relevant disciplinary history."
The AWC alleges that in violation of FINRA Rule 2010, Paula attempted to settle a customer complaint related to losses in the customer's account by agreeing in a May 5, 2014, letter to "refund the total principal associated with the trades." Thereafter, in January 2015, Paula issued to the customer a $10,000 check as the first installment of the settlement. The AWC alleges that:
[P]aula asked the customer not to cash the check until he could fund his checking account, but never actually funded his checking account or made any other attempts to repay the customer for the losses in her account.
Paula never informed NYL of the customer complaint or obtained authorization from NYL to attempt to settle the customer's complaint.
In accordance with the terms of the AWC FINRA imposed upon Paula a $5,000 fine and a 30-business-day suspension from associating with any FINRA member firm in any capacity.
Bill Singer's Comment
I'm gonna go out on a limb here and make a wild guess. I'm thinkin' that the customer went ballistic when Paula never managed to fund the payment for the $10,000 check. I'm guessin' that maybe the customer called up NYL and screamed bloody murder about getting jerked around via a settlement for which a $10,000 check was tendered but never paid. All of which prompts me to wonder just what Paula had in mind here. I mean, c'mon, at some point it's either put-up-or-shut-up, right? At some point, ya gotta pay the piper and hand over ten grand -- as you agreed. Sort of like the fighter who keeps backing up in the ring until he comes to the ropes, and then there's no place to go, and then the opponent has you cornered and bangs the crap outta you. All of which explains why Paula took the 30-business-day count while flat on his back on the mat looking up at the FINRA ref.
Online FINRA BrokerCheck records as of October 19, 2018, disclose under the heading "Financial -- Final" that Paula had been granted a discharge in bankruptcy in July 2009.
Under the BrokerCheck heading "Customer Disputes - Closed-No Action / Withdrawn / Dismissed / Denied" NYLIFE disclosed its receipt of a complaint in September 2011, which it denied, seeking $7,234.50 in damages based upon allegations that:
CUSTOMER ALLEGES THAT THE VARIABLE ANNUITY POLICY SHE PURCHASED IN JUNE 2011 WAS MISREPRESENTED AND IS UNSUITABLE BASED ON HER INVESTMENT NEEDS. SHE FURTHER ALLEGES THAT THE SURRENDER PERIOD ASSOCIATED WITH THE ANNUITY WAS NOT DISCLOSED.
Under the heading "Customer Dispute - Settled" NYLIFE disclosed its receipt of a FINRA Arbitration Complaint in October 2017, seeking $100,000 in damages; settled in December 2017 for $32,234.85 (without contribution from Paula); and based upon allegations that:
Claimant alleges that in September and October 2010 stocks were sold and purchased from her account without her authorization.