November 20, 2018
Timing in life is everything, and all the more so when it comes to litigation. The sooner a complaint is filed, the more likely it is that an unhappy brokerage customer will be viewed as sincere. Unfortunately, sometimes a gruntled customer just doesn't know that she should be disgruntled. Maybe she was defrauded by her stockbroker. Maybe she was lied to by the brokerage firm. Maybe she misunderstood her statements. Similarly, a stockbroker may think that he's doing a great job and his clients are a happy and contented bunch but, wham, out of nowhere, he learns that complaints are coming in about trades that were done many months or years ago. In today's featured FINRA arbitration, we have a stockbroker who seems to have been on the receiving end of some stale customer complaints. The stockbroker let those complaints sit on his industry record for about a decade; and during that period in Wall Street's cellar, those wines didn't improve with age but turned to vinegar. Rather than throw the vinegar out, the stockbroker turned it into salad dressing.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in March 2018, associated person Claimant Cuenca sought the expungement from his Central Registration Depository records ("CRD") of a customer complaint by "Mr. and Mrs. V" and a customer complaint by "Mr. T." Additionally, Claimant Cuenca sought $1 in compensatory damages. In the Matter of the FINRA Arbitration Between Frank Augustine Cuenca, Claimant, vs. Securities Service Network, LLC, Respondent (FINRA Arbitration 18-01117, November 14, 2018).
Respondent Securities Service Network did not appear at the expungement hearing; and the customers who had filed the underlying complaints did not appear despite being notified.
In recommending the expungement of the two customer complaints, the sole FINRA Arbitrator made a FINRA Rule 2080 finding that the claim, allegation, or information is factually impossible or clearly erroneous. The Arbitrator offered the following rationale:
Occurrence Number 1436191 (in which Mr. and Mrs. V are the
Claimant credibly testified that Mr. and Mrs. V, husband and wife, provided
him with a standing order to maintain a designated level of liquidity in Mr.
V's IRA to fund a set monthly withdrawal. Claimant's counsel attested that
she sought a copy of the standing order through discovery, but this
request was not met with success.
Claimant credibly testified that he received this order shortly after Mr. and
Mrs. V became clients in 1998 and that he acted on it until Claimant left
the employ of Respondent in August 2008. This is 6 months prior to the
event end date noted in Mr. and Mrs. V's complaint dated December 10,
Mr. and Mrs. V alleged that "liquidations took place without prior
authorization between November 2006 and December 2008."
Respondent investigated the complaint and rejected it as unfounded. Mr.
and Mrs. V took no further action.
Mr. and Mrs. V 's allegation strains credulity. If the liquidations took place
between August 2008 and December 2008, Claimant clearly had no part
in the subject issue as he had left the employ of Respondent in August
Occurrence Number 1446618 (in which Ms. T is the underlying customer)
On March 2, 2009, more than six months after Claimant had left Respondent's employ, Ms. T alleged that Claimant "was negligent in failing to act on her instructions to liquidate her accounts to move her funds to money market on June 12, 2008."
Claimant credibly testified that he received no such instructions. Crediting Ms. T's allegation would require the Arbitrator to believe that, for nine months, from the time of the liquidation instruction to the date of the complaint, Ms. T did not notice the failure to liquidate all of her investments. The Arbitrator did not find that to be credible.
Bill Singer's Comment
Online FINRA BrokerCheck records as of November 20, 2018, disclose that Cuenca was first registered in 1991, and he was registered with Securities Service Network, Inc. from September 2006 to September 2008. Let's add that information into the FINRA Arbitration Decision's assertions about Mr. and Mrs. V's complaint:
Claimant credibly testified that he received this order shortly after Mr. and Mrs. V became clients in 1998 and that he acted on it until Claimant left the employ of Respondent in August 2008. This is 6 months prior to the event end date noted in Mr. and Mrs. V's complaint dated December 10, 2008.
It appears that Mr. and Mrs. V were clients of Cuenca's from 1998, which means that by 2008, the couple had been with Cuenca for about a decade. Further, the Decision states that Cuenca "left the employ of Respondent in August 2008," but BrokerCheck says that he was registered until September 2008: the one-month disparity could be the result of delayed paperwork hitting FINRA's CRD system. The Decision says that when Cuenca left Securities Service Network in August 2008, that was "6 months prior to the event end date" noted in Mr. and Mrs. V's December 2008 complaint. If August 2008 was six month prior to an event end date, then that end date would be in February 2009. Unfortunately, I truly don't understand what the Arbitrator means by referring to an "event end date;" and my mystification is compounded when I read that it's possible that "the liquidations took place between August 2008 and December 2008." If there is a reference to liquidations taking place no later than December 2008, then what the hell is a February 2009 end date? As far as the Arbitrator was concerned, the event end date was a bridge too far because any liquidations that took place after Cuenca's August 2008 departure from Securities Service Network were not of his doing and not his responsibility.
Mr. and Mrs. V complaint apparently assert that the liquidations at issue occurred between November 2006 and December 2008, but the customers only first complained in writing on December 10, 2008 -- keep in mind that the couple had been Cuenca's clients since 1998 and that he left Securities Service Network's employ in August 2008. All of which prompts a very legitimate question as to why the couple waited to complain to the brokerage firm six months after Cuenca left and possibly two years after the first unauthorized liquidations began. Similarly, if the couple were outraged by Cuenca's conduct, how come they did not pursue their grievances in litigation after the brokerage firm denied their claims? In fact, there are often sound reasons for disgruntled customers declining to pursue their complaints; not the least of which may be the costs of pursuing such litigation. On the other hand, you were not at the expungement hearing; I was not at the expungement hearing, but the Arbitrator who read the documents and heard the testimony minced no words when he found that "Mr. and Mrs. V's allegation strains credulity. . ."
Similarly, we have Ms. T's complaint of March 2, 2009, that raised allegations about Cuenca's purported failure to liquidate her account on June 12, 2008. Ummm . . . wow . . . Cuenca supposedly left Securities Service Network in August 2008 but Ms. T first complains in March 2009 about June 2008 transactions? My head is throbbing just trying to line those dates up. Nine months after the liquidations were supposed to occur, the client is first complaining -- and doing so nearly seven months after Cuenca left the brokerage firm. Again, not saying that a client could not legitimately present such a case but, yet again, the Decision minces no words: "The Arbitrator did not find that to be credible."
The ultimate lesson here for public customers is your credibility may hinge upon filing a timely, prompt complaint. If you were prevented from discovering facts because of the bad acts of your stockbroker or brokerage firm, make sure to set those events out in detail. Further, if and when your stockbroker quits the brokerage firm where you have an account, make sure to look at your holdings and confirm with the firm (not the departed stockbroker) that what you see is what you got. As with many things in life, "strike while the iron is hot," makes sense.
Compliments to Claimant Cuenca's legal team: Dochtor Kennedy, MBA, J.D., AdvisorLaw LLC, and Michelle Atlas, Esq., HLBS Law.