April 6, 2019
It may be that the SEC is coming after you but you just can't afford a lawyer; and you're not going to go down without a fight. In a fighting mood or not, even boxing has the Marquess of Queensberry Rules. For many industry respondents who are asked to doff the old boxin' gloves and climb into the ring with a regulator, sometimes the problem is as mundane as how to find the location of the hearing room or where to sit or when to stand. Similarly, there's always a first time for everything, and even lawyers may not be sure as to what's what for their first trial or hearing. In that spirit, today's blog presents a recent SEC "Scheduling Order," which is pretty much a primer on the preliminaries leading up to the clanging of the bell for Round One.
Every registered rep is required to have customer communications "approved" by their branch manager.Wall Street lawyer Aegis Frumento wonders if the Supreme Court's recent Lorenzo Opinion will result in only the branch manager being primarily liable for lying to customers. Conversely, Frumento muses about whether those twenty-something interns who are ordered to send somewhat sketchy emails will now be found liable for "disseminating" fraudulent statements?
In a recent FINRA regulatory settlement, we come across a case in which a registered rep didn't make a bad situation worse. Which isn't to say that he undid the bad situation. He didn't. It is to say that he seems to have renounced engaging in further bad actions, which, if nothing else, gave FINRA an excuse to pull its punches. Some might say that the rep stopped short because his broker-dealer caught him in the act. That may be true. On the other hand, whatever the motivation, the confidential information of 1,696 retirement-plan participants never got misused beyond being wrongfully downloaded into spreadsheets and emailed away from the firm. Other than that Mrs. Lincoln, did you at least enjoy the play?
Economists define the Great Recession has having started in December 2007 and ended in June 2009. That 2009 terminus may well be justified by statistics, but for those who lived through that period of economic devastation, the after-effects continued into 2011, and for many, well into 2014. The psychological impact of the economic crisis is still felt today. Look at a chart of most stock indices from 2009 to 2019 and it's almost a vertical line up with a few hiccups along the way. On the other hand, the 10-Year Treasury chart is less rewarding -- in January 2009, the rate was about 2.25% but by April 2019, the rate was only 2.49%. So . . . what happens when you stand atop that high perch of 2019 and look back to 2013/2014, when you ventured back into the stock and bond markets? Are you now angry with your stockbroker, who took you at your word that you wanted to be "conservative?" Are you at peace with your decision to reduce your speculation notwithstanding that you might have achieved better results? Do you wish you had allocated more assets to stocks and fewer to bonds? A recent FINRA public customer arbitration against Morgan Stanley and two stockbrokers explores whether the cause of a purportedly "under-productive" brokerage account was a conservative strategy that was too conservative?
In today's featured FINRA public-customer arbitration, we got allegations by a husband against an ex-wife, which, you know, sort of means that he's an ex-husband, but, for reasons that I don't quite understand, only the wife is referenced in the FINRA Arbitration Decision as an "ex." Be that as it may, the Claimant husband -- ex-husband -- sued his brokerage firm and stockbroker alleging that they were somehow involved with the alleged looting of the couple's joint accounts. Ah yes, the old he-said-she-said-she-looted.