May 23, 2020
A public customer filed a FINRA Arbitration Statement of Claim against Wells Fargo Advisors and asked for no less than $100,000 in damages. The arbitrators found in the customer's favor and awarded about $99,000 in damages and fees. For whatever reasons, the customer appealed the FINRA Award to federal court. The Court looked somewhat askance at a quintessential shotgun pleading and a myriad of motions. Not the dried-out prose of the courtroom. Frankly, a tad poetic.
The Governor of Wisconsin directed the state Health Department to issue orders protecting the public during the onslaught of COVID-19. The Department issued Order 28 requiring citizens to stay home under threat of criminal penalties. The State Legislature sued and argued that the Health Commissioner lacked the authority to issue Order 28 absent prior submission to the state rule-making process (which had not occurred). In a 161-page document, the Wisconsin Supreme Court over-ruled the Governor's stay-at-home-order. All of which got Guest Blogger Aegis Frumento, Esq. thinking. What about emergency powers? What about short-circuiting the legislative process in times of plague? Is there ever a time when process should trump prudence?
The customer never asked the stockbroker to sell anything. The stockbroker never had the right to exercise discretion. The customer was market savvy. As best we can tell, everything was okay until it wasn't. Five years go by and, whammo, the customer complains not about what was bought but about what wasn't sold. Sure as hell took a long time for that grievance to bubble up.
Over the years, I have chided, cajoled, and chastised FINRA for its woefully inconsistent approach to disclosing disciplinary histories. Beyond the simple act of disclosure, FINRA has exacerbated the issue by resorting to such inconsistent characterizations as mere "prior disciplinary history," versus "relevant disciplinary history," versus "relevant formal disciplinary history" versus the inclusion or exclusion of specific prior disciplinary history at the SEC or with a state regulator or with any other regulator. In one of the most glaring examples of FINRA's dubious approach to disclosure, Wall Street's leading self-regulatory-organization pronounced in a recent regulatory settlement that Merrill Lynch Pierce Fenner & Smith, Incorporated "does not have any relevant disciplinary history with the Securities and Exchange Commission, any state securities regulators, FINRA, or any other self-regulatory organization."
In the rush to regulate, we frequently fail to discern between the "value" of various regulatory initiatives versus the "cost" of same. Indeed, the "thrill" of amassing a heretofore non-existent regulatory database has a narcotic-dependency-like effect, which drives us to find ways to obtain and archive even more and more data. That often insatiable zeal for collecting and categorizing everything about everyone, presages a world in which we have gone too far, too fast -- with no way to go back.