Miscommunication and Misunderstanding in Edward Jones FINRA Arbitration

May 2, 2011

In a FINRA Arbitration Statement of Claim filed in August 2010, Claimant sought to recover at least $15,000 in compensatory plus $5,000 in punitive damages arising out of the alleged losses sustained in the purchase of General Motors Acceptance Corporations (GMAC) bonds. In the Matter of the Estate of Lula Mae McDonald, Claimant, vs. Edward Jones and Melanie Jo Housden, Respondents (FINRA Arbitration 10-03985, April 26, 2011).

The sole FINRA Arbitrator hearing this case found that Respondent Edward Jones was liable and ordered it to pay to Claimant $15,005.83 in compensatory damages.

Now things get a bit more interesting.

Expungement

The  FINRA Arbitrator recommended the expungement of all reference to the arbitration from Respondent Housden's Central Registration Depository ("CRD")  records in accordance with Notice to Members 04-16: Expungement

The Arbitrator recommended expungement solely based upon the oral testimony provided by both Respondent Housden and an Independent Executor at the telephonic hearing. The Arbitrator concluded that there was no evidence to substantiate any allegation that Respondent Housden had committed a sales practice violation. 

In reaching that decision, the FINRA Arbitrator conceded that there were two versions of a critical meeting held in Respondent Housden's office on March 18, 2005.  As with many relatively terse FINRA Arbitration Decisions, we just don't know what happened at that meeting or why it was so pivotal. Nonetheless, the Arbitrator determined that

What was proven was that miscommunication and misunderstanding were probable but not that Ms. Housden was involved in an investment related sales practice violation. Absent any written documentation or witness testimony substantiating this claim, it is the opinion of the Arbitrator that the expungement relief request is meritorious and granting it would have no material adverse affect on investor protection, the integrity of the CRD system or regulatory requirements.

SIDE BAR: On the one hand, the Claimant public customer seems to have won this arbitration.  Although we truly have no understanding or appreciation as to the guts of the customer's complaint, in the end, the bucks come out of FINRA member firm Edward Jones's pocket. To that extent, all's well that ends well for the Claimant.

On the other hand, the Respondent registered person doesn't exactly go away a loser. Having granted victory to the public customer, the Arbitrator wrestled with an important issue.  Was there proof - any proof, even so much as a scintilla - that Respondent Housden had personally engaged in a sales practice violation?  The Arbitrator determined that there had been "miscommunication and misunderstanding," but did not see any proof that Housden had enaged in any fraud or sales practice violations. 

The FINRA Arbitrator demonstrated wisdom and fairness when recognizing that absent some quantum of proof, it would be an injustice to mark up Respondent Housden's CRD record solely based upon an unproven allegation.

I commend this FINRA Arbitrator for fashioning a decision that was fair under the totality of the circumstances.