December 8, 2018
In today's featured FINRA expungement arbitration, we praise the impressive effort of a lone FINRA arbitrator, who patiently and intelligently explains what happened, what she considered, and why she recommends the expungement of a customer complaint from a stockbroker's industry record.
The geniuses who designed our current regulatory theories were reacting to a particular reality, one in which transactions required paper instruments to be transferred from person to person. They imposed responsibility on humans because they understood that humans make mistakes, and cheat, lie and steal. Liability, they reasoned, would keep humans careful and honest. I don't disagree with any of that. But it does raise this question, and it is fundamental to blockchain-enabled securities transactions: Who can you blame when no humans are involved?
We raise the curtain on a husband and wife headed for divorce. He is a stockbroker. She is a customer. She is not an actual customer. She is not a customer. This shape-shifter-customer-not-a-customer is certainly an estranged wife headed for divorce. The husband's brokerage firm marks up his industry record with the wife's allegations of misconduct. Apparently the divorce court didn't believe her allegations; and apparently, the sole FINRA Arbitrator hearing the husband's expungement request didn't either. They better try this one out of town before hitting Broadway. The audience may get lost in Act I and never catch the drift thereafter.
On Wall Street, the majority of employment disputes tend to get resolved in favor of employers. Some of that may be prompted by the Terminable-at-Will doctrine, which seems an attempt to balance employees' right to quit at their discretion by imbuing employers with the discretion to fire at will. Although the doctrine is short-circuited by the express terms of an employment contract or the rules of a union shop, the courts frequently sanction at-will discharges involving violations of constitutionally protected rights or tortious misconduct. In a recent industry employment dispute, the former employee has a laundry list of complaints against his former employer. Simply going by the averages for such cases, you sort of anticipate that the Claimant is going to go down in flames. Then you come upon the stunning finding by three independent arbitrators that the former employee's discharge was "unwarranted." You don't see that conclusion every day in a Wall Street employment dispute. In the end, it's an unmitigated victory for a former employee.
Under consideration today is a troubling FINRA regulatory settlement involving two deceased customers, their stockbroker, and a whole host of developments involving powers of attorney, beneficiary designations, and trusts. As is sometimes the case with these eye-opening matters, we are left to ponder why the customers were so generous towards their stockbroker; and, at the same time, we are left uneasy as to why the stockbrokers engaged in the alleged subterfuge. In the end, there are far too many unanswered questions by FINRA -- for which publisher Bill Singer takes the self-regulatory-organization to task.