March 7, 2020
Dog bites man -- eh. Man bites dog -- now that's a story! In today's blog, we have a FINRA Arbitration Panel awarding damages, costs, and fees to a public customer Claimant against the servicing stockbroker and the brokerage firm Respondents. That's the "eh" part of the story. In a bit of a twist, however, the same Panel in the same case also awarded damages against the same public customer to the same servicing stockbroker. Customer bites stockbroker -- eh. Stockbroker bites customer -- stop the presses!
Attorney Aegis Frumento just doesn't think that the stock markets care about the threat of the Covid-19 virus -- or the fear that it evokes. Frumento says that's because markets, unlike humans, calculate probabilities correctly. Further, the markets have not historically reacted to pandemics, not even pandemics much worse than this one. Uncertainty is what markets are all about. The wisdom of the crowd discounts future uncertainties into the market price. Pandemics are certainly one of those uncertainties that, throughout history, markets have taken in stride because they already priced them in.
Sometimes a registered representative's non-disclosure of a tax lien is inadvertent: You didn't know that one had been filed. Sometimes the rep believed that a tax dispute had been resolved and no lien was issued -- or his CPA gave the impression that the lien had been recalled, cancelled, or something along the lines that what was, isn't, and, as such, fuggedaboutit. Whatever the explanation or excuse, during some four decades practicing law on Wall Street, I've likely hear 'em all. In a small percentage of "I didn't know about the lien" cases, the rep is truly the unfortunate victim of a bona fide misunderstanding; however, more often than not, the rep intentionally embarked upon a course of non-disclosure out of embarrassment or out of fear that a disclosure would prompt a termination. Consequently, yet again, here is my annual offering about the dire consequences of willfully failing to disclose tax liens.
Today's featured lawsuit involves a somewhat tortured fact pattern, which bends and twists its way through a political scandal, entangled financing for a hotel, a FINRA arbitration, and into federal court. Even after you've read the fact pattern a few times, you're still not quite sure who did what to whom. Frankly, you never feel like you've got a firm grasp on anything.
Some folks just don't know when to quit; and, at times, we admire their dogged perseverance. Other times, we should be mindful of W.C. Fields' admonition that "If at first you don't succeed, try, try again. Then quit. No use being a damn fool about it." In a recent FINRA Arbitration, an underwriter sued to recover a success fee. Trouble is, it seems that another underwriter actually moved the IPO ball over the goal line. Is this a case of perseverance or foolishness? See how the Arbitration Panel ruled.