January 19, 2019
State of the Union: Clowns to the Left, Jokers to the Right (BrokeAndBroker.com Blog)
Who'd a thunk it? I've sort of run out of things to write about today, what with the federal government shut down and not all that much going on at the Department of Justice, the Securities and Exchange Commission, or the Commodity Futures Trading Commission. Funny thing . . . lawyers who make a living crossing swords with the Feds aren't all that happy these days. Apparently, it's proving really, really tough to pad your bills when there's no one to communicate with at DOJ, SEC, or CFTC. Which might explain why some clients are beginning to note entries on their legal bills for inexplicable telephone calls with FINRA or NFA, or some inquiry to a state securities division.
GUEST BLOG: The SEC's Gagging Rights by Aegis Frumento Esq (BrokeAndBroker.com Blog)
The Cato Institute says that it has a book manuscript by someone who settled a case with the SEC showing that "the SEC's allegations against him were unfounded and unfair." But an SEC gag order in the author's settlement agreement, seems to be preventing the Institute from publishing that book. All of which prompted the Cato Institute to sue the SEC. The Complaint asserts that the SEC settles 98% of the cases it brings. But of the 2% that go to trial, the SEC tends to "win" only 88% overall, and only 57% of the time when the charges involve insider trading. Those are still high numbers, but they are not 98%. They suggest that of the approximately 800 cases that the SEC settles each year, perhaps 100 of them might reasonably be contested at trial, including perhaps 25 of the over 50 insider trading cases. Yet the SEC tries less than 20 cases a year. Of course, with the SEC suffering under a hiring freeze since 2016, it would not have the staff to try 120 cases a year, even if the government wasn't shut down. But still, maybe 100 respondents a year settle who might have beaten the SEC in court. A hundred ensnared innocent respondents is not insignificant.
Man Bites Dog. Stockbroker Sues Customer. Dog and Customer Bite Back (BrokeAndBroker.com Blog)
Folks wear lots of hats on Wall Street. You got your stockbrokers. You got your investment advisers or advisors or however the hell you prefer to spell it. You got lots of confusing and redundant titles like financial consultants and financial advisors and let's not even get into the myriad of vice presidents. At times, a "customer" may be dealing with a stockbroker; and other times with a investment advisor representative; and at times with both. Of course, what would Wall Street be without lawyers and our penchant for generating lots and lots of documents. Accordingly, every time a customer opens a new account, wham, ya got new account paperwork with lots of paragraphs, clauses, and provisions. Unfortunately, sometimes that paperwork explosion blows up on the very parties who have signed their names, multiple times, on many dotted lines. In a recent lawsuit, we have a stockbroker/investment advisor suing his broker-dealer/RIA customer. The broker-dealer account requires arbitration but the investment advisory account doesn't. Anyone got a coin to flip?
FINRA Gets Email Snafu Right But Its Regulatory Role Wrong (BrokeAndBroker.com Blog)
Nuance is lost in today's era of bombast. Live long enough and you realize that few things in life are black or white -- maybe it's my failing eyesight, but as I get older, I'm noticing lots of shades of gray. In today's featured FINRA AWC regulatory settlement, the self-regulatory-organization sanctions a member firm for inadequate supervision of outside email usage. Without question, FINRA is on point and presents its case with merit. On the other hand, there's a bit of so-called gotcha regulation at play here, and that needs to be called out. On the other hand (yes, the dreaded "third" other hand), it's not FINRA's job to run a member firm's compliance department. On the other hand (oh my, the rare "fourth" other hand), there are times when FINRA has to be more energetic in preemptively inserting itself into any firm's compliance structure and insisting that the public is protected. Reading toe-tags in the morgue is not effective Wall Street policing.
Federal Court Says Former Raymond James Employee Was On Notice of FINRA Arbitration
It's a common enough problem with all forms of lawsuits. I served you. No you didn't. Yes, I did. No, you didn't. Yes. No. Yes. No . . . and it goes on and on and on until some judge weighs in with the final "yes" or "no;" and even at that point, a round of appeals may follow. In delving into what did and didn't happen during service, we often come across the scenario where the party to be served used to live at address A but moved to address B, and service was made at A. Then there's the other variation on the theme where we have an affidavit swearing on a stack of bibles that the process server made honest-to-goodness service but, you know, turns out that the service wasn't so "honest" and there wasn't much "goodness" about it. Finally, we got the oh-so clever party who won't answer his door, won't pick up the certified mail, and does everything possible to legally avoid service. In a recent FINRA intra-industry arbitration, we got Raymond James Financial Services attempting to sue a former registered representative over repayment of a loan. The former employer says the former employee was served with the Statement of Claim. The former employee says he didn't get served with jack.