In today's featured FINRA expungement case, we are asked to consider the plight of a stockbroker, who seems a Wall Street Peter Pan seeking elusive justice in Never-Neverland. As best I understand, the Lost Boys invested in hedge funds but got wiped out during the Great Recession when it turned out that Captain Cook was a Ponzi hustler.
Case In Point
In a Financial Industry Regulatory Authority Statement of Claim filed in June 2018, associated person Claimant Redferan sought the expungement of a customer complaint from his Central Registration Depository record ("CRD"). Claimant sought $1 in compensatory damages.In the Matter of the Arbitration Between John Earle Redfearn, III, Claimant, v. QA3 Financial Corp., Respondent (FINRA Arbitration Decision 18-02111 / January 25, 2019)
Respondent QA3 Financial Corp did not file an Answer and did not participate in the hearing. Although efforts were made to locate the customer, that individual could not be found and did not participate in the hearing.
The sole FINRA Arbitrator denied Claimant Redfearn's request for $1 in compensatory damages, and recommended the expungement of the customer complaint pursuant to a FINRA Rule 2080 finding that the customer's claim, allegation, or information is factually impossible or clearly erroneous; and that the registered person was not involved in the alleged investment-related sales
practice violation, forgery, theft, misappropriation, or conversion of funds. The Arbitrator offered this rationale:
1. Claimant was not the Customer's financial advisor;
2. Claimant never met the Customer;
3. Claimant never spoke with the Customer;
4. Claimant never recommended any securities of any type to the Customer;
5. Claimant never supervised anyone who may have recommended the subject
securities to the Customer; and
6. Claimant was never involved in any way with the Customer or her purchase of
the subject securities.
Bill Singer's Comment
As of January 28, 2019, Redfearn's BrokerCheck records disclose only one item under the heading "Customer Dispute - Closed-No Action / Withdrawn/Dismissed/Denied." That disclosure referenced a class action involving DPP and LP investments that purportedly defaulted in 2009 during the Great Recession. Redfearn's "Broker Statement" filed on January 9, 2012, asserts:
I WAS NOT NAMED AND EVIDENTLY MOST IMPORTANTLY, THE COMPLAINT AIMED AT MY FORMER BD (INSUFFICIENT DUE DILIGENCE) HAS BEEN INACTIVE FOR 2 YEARS. THE INACTIVITY IS PERMANENT BECAUSE MY FORMER BD (QA3) WENT BDW AND FILE [sic] FOR BANKRUPTCY AND NO LONGER EXISTS -- SO THE DEEP POCKET AND NAMED TARGET NO LONGER EXISTS. BASED UPON (1) NOT BEING NAMED AND (2) THE COMPLAINT WAS FILED ON DEC 23, 2009 AND HAS BEEN INACTIVE SINCE FILES [sic] WHICH AS OF TODAY IS TWO YEARS OF INACTIVITY, I REQUEST THAT THE DISCLOSURE ON MY U4 BE ARCHIVED TO THE NON-PUBLIC ELEMENT OF MY U4.
According to FINRA's online BrokerCheck records, Redfearn was first registered in 1996 and was with Respondent QA3 Financial Corp from 2007 to February 2011. BrokerCheck records disclose that QA3 Financial Corp's "SEC Registration Status" was "terminated" on April 12, 2011, and that FINRA had cancelled this member's license in March 2011. Given the dates, it doesn't take a genius to sense that the impetus for the customers' complaints was the devastation wrought by the Great Recession -- which is not an excuse for stockbroker and/or brokerage firm fraud, and is not a catch-all behind which any sales practice misconduct should be permitted to hide; however, given the findings by the independent FINRA Arbitrator, it seems that the market collapse and QA3's failure were the culprits rather than any conduct by Redfearn.
I'm sorry -- but this is as outrageous a bit of regulation and compliance as I've ever seen. It is absolutely disgraceful that Claimant Redfearn, apparently an innocent man, was required to retain a lawyer and pursue his vindication for something that never . . . Never . . . NEVER!!! happened. If FINRA truly gave a damn about fairness for the hundreds of thousands of associated persons laboring at its member firms, this unadulterated bull-shit would not be allowed to continue. And how the hell do you have this fact pattern and decision yet the Arbitrator doesn't award a lousy $1 in requested damages to an innocent man?