February 1, 2020
In today's featured FINRA regulatory settlement, we come across an elderly, retired customer who was victimized by unsuitable options trading. As bad as the facts are, when you parse through the numbers, it's not as outrageous as you first think. Be that as it may, when choosing between the lesser of two evils, it's important to consider that the choice is still between two evils.
Tommy Chong spent some time in a federal joint for selling, in more benighted days, bongs and water pipes. It is a fun fact that Tommy's cellmate was -- I kid you not - Wolf of Wall Street Jordan Belfort, who was in for securities fraud (duh!). That odd jailhouse pairing had the seeds of one stoner of a sit-com. But the moment may have passed. Today, the sort of high finance comedy that might have won an Emmy instead gets us an SEC enforcement case.
Featured in today's FINRA regulatory settlement is the hot-button issue of a stockbroker receiving a loan from a customer, who was a widow. Further, that same widow also paid for three vacations for that same stockbroker. Shortly after the loans and the gifts, the widow died. Not exactly a warm and fuzzy picture.
For many FINRA member firms and associated persons, the self-regulatory-organization's response to infractions of its rules may be the imposition of a suspension, expulsion, or bar. In some cases, aggrieved respondents file an appeal with the SEC. What happens to the FINRA sanctions during the pendency of the appeal to the federal regulator? As it often the case, the best answer is that it "depends;" and there are numerous rules, requirements, and tests by which one either overcomes or is frustrated by such dependency. As demonstrated in a recent appeal by an expelled FINRA member firm, the quality of the SEC's mercy is not only strained but it is also sliced, diced, chopped, and pureed.
When is "enough" enough? When does "reasonable" become "unreasonable?" How many times does it take before "infrequent" is deemed "frequent?" In a recent FINRA intra-industry arbitration, the Arbitrator was asked to decide whether an expungement claim was filed "timely." FINRA's so-called Six-Year Eligibility Rule offers some guidance on the issue, but it depends upon when you set the date by which the countdown begins. Be that as it may, are there some claims that are just too old for expungement? How about one that's been steeping and brewing for 17 years?