An irreverent Wall Street Blog
by Bill Singer
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

Former Employee Settles Promissory Note Case with Morgan Keegan
Written: March 31, 2011

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in December 2009, Claimant Morgan Keegan sought to enforce the terms of three promissory notes and related agreements that Respondent Cain had executed during his employment.  The cause of action arose following Respondent Cain's resignation and his alleged failure to repay the outstanding debt. Claimant sought $815,187.05 in compensatory damages plus interest at the rate of 10% from the inception of the loans until payment, attorney's fees, costs, and other relief. 

Respondent Cain generally denied the allegations, asserted various affirmative defenses, and filed a Counterclaim asserting fraudulent inducement and various breaches by Claimant. In addition to the cancellation of any debt, Respoindent sought at least $100,000 in damages, fees, costs, and expenses. Claimant denied Respondent's allegations.

In the Matter of the Arbitration Between Morgan Keegan & Co., Inc., Claimant, vs. Michael Sean Cain, Respondent (FINRA Arbitration 09-06845, March 23, 2011).


In January 2011, the parties settled this matter and in March 2011 they submitted a proposed Stipulated Award that the FINRA Arbitration Panel entered with the following stipulations:

Respondent shall pay Claimant $814,187.05 (the "Principal Amount"), with interest on the outstanding principal amount accruing at 5% per annum from February 15, 2011.  The payments will be made pursuant to the following schedule ("Payment Schedule"), which reflects said Principal Amount and interest:

  • $250,000.00 due no later than February 15, 2011;
  • five payments each of $111,000.00, due no later than
    • February 15, 2012;
    • February 15, 2013
    • February 15, 2014
    • February 15, 2015
    • February 15, 2016; and,
  • $112,052.28 due no later than February 15, 2017.

Villa Pachanga

In the event Respondent Cain sells, mortgages or otherwise liquidates his interest in the Playa Matapalo, Costa Rica property known as Villa Pachanga, the Payment Schedule shall be accelerated and any outstanding Principal Amount, including interest then due, shall become immediately due and payable.

SIDE BAR: What is the takeaway from this case?  Everything is negotiable.

Few promissory note settlements are worked out for more than a one-year term -- and rarely beyond three years.  However, such an observation is merely the result of my three-decades on Wall Street as a lawyer, and as any veteran attorney knows, there are statistics and then there are the exceptions.  Frankly, when it comes to the repayment of money -- particularly the big bucks here -- everyone is motivated to compromise. Like I said, rule number one: everything is negotiable.

In this dispute we see that the Respondent managed to get a work-out of his obligation over a six-year period.  That's a very long time for repayment and I'm sure that the lawyers on both sides of this dispute sweated the details.

I also note that the stipulated schedule of payments is set forth on a net basis:

Adding up the

  • $250,000;
  • $555,000 (the five payments of $111,000). and
  • $112,052.28,

the total obligation is $917,052.28.

Consequently, the Respondent not only obtained the value of extending repayment over six years but also avoided repayment at the 10% interest rate initially sought by Claimant and wound up with a lower 5% rate. 

A minor and oddball issue is that the amount settled for -- $814,187.05 -- resulted in a $1,000 reduction from the amount initially sought, $815,187.05. Why?  I have no idea. Either one of the numbers is a typo or the parties just agreed to the lower number.

Finally, my take on the arrangement involving the Costa Rican property is that is was viewed by Claimant as a form of collateral for the Respondent's obligations under the repayment agreement.  In the event of a default, I would assume that Claimant would look to seize that property in order to secure the remaining debt.  However, should Respondent desire or need to sell that property, such conduct would trigger the repayment acceleration provision of the settlement. 

While a clever and sensible tactic, the enforcement of such a term can get tricky, particularly when dealing with offshore property in a foreign jurisdiciton.  While the ability to cloud the title to real estate in the U.S. under these circumstances may not be too daunting, the vagaries of foreign laws and jurisdictions have a way of raising challenges.  A prudent way to enhance the creditor's rights in such circumstances would be to execute an agreement between the parties that contains provisions to ensure that there is no sale or title transfer without timely prior notice to Claimant. Another sensible protection would be to go to the foreign jurisdiction and attempt to register the creditor's rights in the form of a lien or title restriction.  Finally, a creditor could simply demand that the title be assigned to it during the pendency of the repayment term -- but that could pose significant problems, particularly if there are any outstanding loans or mortgages on the property.


Previous Entries
April 20, 2015
In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in March 2013, Claimant Marriott asserted breach of fiduci... Read On
April 18, 2015
US Attorney and SEC Charge Investment Advisor In $20 Million FraudOn April 16, 2015, the United States Attorney for the Southern District of New York ... Read On
April 17, 2015
On April 16, 2015, the United States Attorney for the Southern District of New York announced that Michael Oppenheim, 48, Livingston, NJ had been ch... Read On
April 17, 2015
In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in September 2013, Clamant Ishii Family Trust asserted br... Read On
April 16, 2015
As readers of the Blog know, I frequently take Wall Street's regulators to task when they fail to do their jobs. Frankly, I've be... Read On
April 15, 2015
On April 14, 2015, Securities and Exchange Commissioner ("SEC") Kara Stein delivered a speech at the SIFMA Operations Conference.  As Commissione... Read On
April 15, 2015
More often than not, a Securities and Exchange Commission's ("SEC's) Administrative Law Judge's ("ALJ's") Initial Decision flies through to finalit... Read On
April 14, 2015
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS: Brok... Read On Job Search

Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Chepucavage Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Morgan Keegan Arbitration Counterclaim Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC Ponzi Affinity Fraud Wachovia Criminal Raymond James Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX FBI Banc of America Pro Se PCAOB Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax Email Netschi Moore Whistleblower Street Sweeper Countrywide Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Thain Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw Appeal Fowler LPL Johnson Cellphone US Airways JPM Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Rule 3050 Away Account Credit Repair PN Advisor Placement Group Fifth Amendment Forex Mortgage Private Placement Moon CGMI Failure to Supervise Merrill Anderson Exam Lee Borrowing Tax Lien Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker Deferred Compensation RIA Prison Disclosure NASAA Aguilar FCPA Subway Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital Due Process God HSBC Private Placements Eric Stein Wire Fraud FINOP CCO Compliance Audit Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Series 7 Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA Disability MetLife Continuing Education Cheating OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Investor Alert Judgment Bank Fraud Deceased Bill Singer BrokeAndBroker TSSB OHO Leveraged ETF Mary Jo White Trustee Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Commissioner Stein Rule 3040 Class Action Beneficiary NYAG Schneiderman 11th Circuit Insurance Gallagher White Self Regulation Short Sale Compromise Website Rule 2010 Check TRO Supervision Vacatur Remand SDNY Rule 12206 BrokeAndBroker Bill Singer Piwowar Stifel Rule 1122 Article V signature Confidential Inside Information Reg SP VA Regulation SP Fees Cease And Desist Customer Rule 3270 Rule 3240 Annual Compliance Questionnaire OWB 2Cir Red Flags Payroll Stockbrokers Cybercrime Loans Altered Records
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+