June 22, 2019
As kids, we spent countless hours arguing over very, very profound things like what would happen if an unstoppable force hit an immovable object; or could God create something too heavy for him to lift; or, could Superman get gas and, if so, would he fart, and, if so, could his gaseous explosion kill a bystander. As you can tell, even from an early age I had the makings of brilliant lawyer! All of which brings me to a FINRA Arbitration in which I was prompted to muse about whether a Pro Se public customer could win a case against a Pro Se stockbroker, or, in the alternative, could a Pro Se stockbroker successfully defend himself against a Pro Se public customer's claims?
Reg BI may have no practical relevance to customer protection, but it will certainly will make a difference to securities lawyers and compliance professionals. They now have a whole new set of rules to parse and policies and procedures to create. Reg BI should impel firms to document their compliance with 14 data points whenever they make a recommendation, all to ensure that they have a robust defense to injured customers by trying to prove that they did everything Reg BI required. Reg BI could well be yet another legal and compliance full-employment act.
The United States District Court for the District of Columbia waded into the debate about whether the SEC may regulate political donations by investment advisers and placement agents through rules promulgated by the self-regulatory-organization FINRA. All of which falls under the financial reform rubric of Pay-to-Play. For those of us fed up with rampant political corruption, such rules and attendant enforcement are welcome relief. For those who see this as a nation of laws, such well-intentioned regulation and enforcement may be viewed as wrongly trampling on the Constitution. Indeed, the road to Hell is paved with good intentions -- as is the road to the courthouse.
At first blush it looks like a fairly common customer complaint. You got an irate public customer naming six respondents in an effort to recover six figures in alleged damages. Just going by the FINRA Arbitration Decision, you're not all that worked up about the she-says-they-say aspect of the dispute, and, hey, who the hell really knows, right? Then you start digging, and, wow, it doesn't look like the customer was blowin' smoke! After a while, you begin to wonder if Wall Street is simply a cesspool. When they get a bad actor in this biz, does anyone give a crap? What's the point of all those regulators on Wall Street? In the end, you don't come away with a good feeling about your investments and the reputation of an industry.
The 2019 FINRA Board of Governors election is upon us. As one of the founders of the NASD Dissident/Reform Movement (now the FINRA Dissident/Reform Movement), and as a member of the 1998 slate of the first four petition candidates to successfully challenge the self-regulatory-organization's process of anointing its industry Board members, I am a fervent proponent of robust, contested elections as a means of democratizing FINRA's Board, which I view as a gerrymandered body designed to entrench the power of the regulator's Large Member Firms and industry special interests. That rigged construct rebuffs meaningful Wall Street reform, artificially constrains the Small Firm Members' influence, and denies proportionate representation for the industry's associated persons and public customers.