It appears that Levine took no further action after her complaint was rejected.  Nonetheless, the customer’s complaint was reported on Detanna’s Central Registration Depository record (“CRD”), which is akin to the dreaded Permanent Record of our ill-spent High School days.

Not Quite a Rush Job

For some reason, eight years after Levine’s complaint was rejected by Morgan Stanley, Detanna filed a Statement of Claim with the Financial Industry Regulatory Authority (“FINRA”) against Levine.  In the Matter of the Arbitration Between Lisa Detanna, Claimant, versus Doreen Levine, Respondent (FINRA Arbitration 10-04558, March 29, 2011).

Why the delay? Why bother to sue? Tell you what, put in your mouthpiece before reading further.  This case is going to get complicated and you might feel like you’re getting pummeled against the ropes by a world champion heavyweight boxer.

The Stipulated Claim for Expungement

In a Stipulated Statement of Claim for Expungement filed with FINRA in October 2010, Claimant Detanna requested the removal from her CRD of Respondent Levine’s 2002 complaint. In more formal terms, that removal is an “expungement.”

In some rare arbitration cases, the Claimant and Respondent may actually agree about some of the allegations in a statement of claim and will “stipulate” to those points that they concur on.  In this case, the Claimant and Respondent apparently stipulated to virtually everything because we’re told that the entire Statement of Claim was a “Stipulated” one. 

Regardless of the unusual stipulated nature of this proceeding, most FINRA arbitrations fall into one of two large baskets; namely,

• a public customer versus a registered person and/or member firm; or,
• a registered person versus a member firm.

The broad terms for those two types of arbitrations are “public customer” and “intra-industry” disputes.

The Double Whammy

Detanna v. Levine is an oddball FINRA arbitration: neither fish nor fowl. It’s not a customer suing a broker. It’s not a dispute between a Wall Street employer and employee. No — this is a case in which a stockbroker is suing a former customer about a nearly eight-year old customer complaint that was rejected by the stockbroker’s firm and didn’t result in a paid settlement to the customer.  Pointedly, Detanna wants Levine’ allegations — and the entire reported incident — expunged from her CRD. Sort of an inverted, reverse double-whammy with a flourish and back-flip.

Frankly, Wall Street professionals are often the targets of customer complaints, and, in many cases, the industry folks just settle the damn thing as the cost of doing business.  However, be it a settled or unsettled complaint, by and large, registered persons in the industry have learned to live with such smudges on their CRD. 

Notably, if a customer merely complains but does not take things up a notch after 24-months – for example, file a lawsuit in court or initiate an arbitration – and there has been no financial settlement of the dispute, industry rules permit the removal of such disclosures from certain records.  It’s unclear whether Detanna amended such records, but it seems that her CRD remained marked with Levine’s complaint (among those of other customers over the years).

Non-Opposition

In any event, Claimant Detanna’s FINRA Statement of Claim asserted that Levine’s 2002 complaint was based upon false claims, allegations, and information. Adding yet another wrinkle to this already atypical case, in September 2010, Respondent Levine executed a document that indicated her non-opposition to the requested expungement, and that was filed by Claimant in December 2010.

Non-opposition? Yet another itch in a case filled with scratches. I don’t necessarily agree. I don’t necessarily disagree. Tell you what, you say what you will, seek what you want, and I won’t oppose it, okay? 

If it would help, think of two prizefighters who have entered the ring.  Before the fight starts, one of the fighters tells the other that his side will throw in the towel when the bell rings to open Round One. That’s about what we have here. One stockbroker ready to do battle. One customer who isn’t prepared to enter the ring.

FINRA Arbitration Decision

Given the facts at hand, a FINRA Arbitrator recommended the expungement of all reference to Respondent Levine’s Complaint from Claimant Detanna’s CRD, subject to the undertakings in Notice to Members 04-16: Expungement.

In finding that the customer’s claims were false, the Arbitrator noted that Morgan Stanley had investigated Levine’s July 2002 complaint, which sought $300,000 for stock losses.  Apparently, Morgan Stanley determined that the disputed stocks were not recommended by Claimant Detanna, nor purchased during the relevant period when Detanna was Levine’s broker.  In fact, Morgan Stanley determined that the stocks were long held by Respondent Levine prior to their transfer in 2000 into her Morgan Stanley account (in March 2001, Levine transferred her account to Smith Barney).

Despite Claimant Detanna’s recommendation that Respondent Levine sell the stocks at issue, Levine chose to retain those positions. Consequently, whatever losses Levine realized were the result of purchases that she made at other firms and without Claimant’s involvement. In fact, the only investments recommended and purchased for Levine by Detanna during her tenure at Morgan Stanley were CD’s, treasuries, and cash equivalents (money market fund). Notably, no monies were lost on these investments.

No point in throwing more jabs or ducking more punches. The final bell has rung. This match is over.  Thankfully!