Customer Claims Merrill Lynch Nickel-and-Dimed a Two-Bit BZ Order

May 10, 2011

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In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim, public customer Claimant Daversa (appearing pro se) alleged that Respondents Ken Cole and Merrill Lynch had failed to execute an order for the purchase of Boise, Inc. ("BZ") common stock and, thereafter, attempted to deceive him as to the circumstances of the order. Respondents generally denied the allegation, asserted various affirmative defenses, and sought an expungement of the matter from Respondent Cole's Central Registration Depository ("CRD") records. In the Matter of the FINRA Arbitration Between John J. Daversa, Claimant vs. Ken Cole and Merrill Lynch, Pierce, Fenner & Smith Inc., Respondents (FINRA Arbitration 10-02673, May 2, 2011).

The Two-Bit Order

Claimant alleged that Respondents failed to follow his order to buy 1,000 shares of BZ at $.25 or better. As a consequence of that failure, Claimant alleged that he would have sold BI at $6 a share, and requested both compensatory and punitive damages. In reply, Respondents alleged that they never failed to enter the Claimant's orders for BZ.

SIDE BAR: Given that Claimant didn't own the disputed BZ shares to sell, he presented the sole FINRA Arbitrator with quite a challenge.

  • First, if Claimant could have purchased BZ shares, what basis price should he be credited with? 

  • Second, assuming that the Arbitrator found that Respondents should have purchased BZ shares for Claimant, then at what sale price (and on what date) should Claimant be credited? 

Timing In Life Is Everything

First Order

In deciding this arbitration, the sole FINRA arbitrator determined that on December 18, 2008, Respondent Merrill Lynch did, in fact, place a Limit Order in Claimant's account to buy 1,000 shares of BZ for $.25.  That order ("First Order") was to remain open until either filled or cancelled for the first business day after January 16, 2009. Respondent Merrill Lynch sent Claimant a confirmation of this order.

Second Order

On January 16, 2009, Respondent Merrill Lynch placed a second Limit Order in Claimant's account to buy 1,000 shares of BZ for $.25. This order ("Second Order") was to remain open until either filled or cancelled for the first business day after February 13, 2009). Again, Respondent Merrill Lynch sent Claimant a confirmation of this order.

Unlike the First Order, the Second Order was not renewed, and on February 17, 2009, Respondent Merrill Lynch sent Claimant confirmation that the Second Order had been cancelled according to its terms. As of February 17th, the price of BZ had not hit Claimant's $.25 limit.  Consequently, during the relevant periods that the two Limit Orders were in effect, BZ failed to trade at or below $.25.

BZ Buzzes Higher

During the weeks of February 23 and March 2, 2009, BZ finally hit $.25,  As of May 4, 2011, BZ traded at $8.25.   

Decision

Given that the FINRA Arbitrator's findings of fact contradict Claimant's assertions that Respondents failed to properly enter and execute his BZ Limit Orders, the claims were dismissed.  Accordingly, the Arbitrator recommended the expungement of Respondent Cole's CRD record.

Don't forget to read: The FINRA Arbitration and the No-Show Parties (Street Sweeper, May 6, 2011).

SPECIAL NOTICE

JOB AVAILABLE

Position Title:  Senior Paralegal

Location: Washington D.C. metropolitan area

 

Position Summary:

 

Position will work with Legal Department on legal support matters for affiliated entities, including mutual funds advised by the Company and future investment companies organized  as affiliated fund companies. The focus of the role will be to support '40 Act fund activities and will be largely responsible for owning the registration process, and other legal processes as assigned.

 

Responsibilities include:

 

  1. Draft, review and update regulatory materials, including registration statements and exemptive applications.
  2. Handle aspects of registration statement process, coordinating printing of prospectuses and supplements.
  3. Maintain master Legal Department calendar, including regulatory filings, board meetings and other non-routine projects.
  4. Responsible for Legal Department document management and electronic files of regulatory materials.
  5. Develop and maintain electronic reference library.
  6. Oversight with respect to board meetings and the preparation of board materials including developing and maintaining pre and post meeting processes.
  7. Maintain and enhance project lists with respect to third party service providers to the Affiliated Funds.
  8. Project management and manage special projects.
  9. Draft initial registration statements for new funds
  10.  Manage contract authorization and negotiation process
  11.  Manage process related to contract terms and commitments  
  12.  Maintain due diligence records for Sarbanes Oxley Process
  13. Maintain legislative initiatives and update manuals
  14. Update registration statement filing process (Maintain comment file and maintain binder of SEC   response letters)
  15.  Document 497 filing process
  16.  Maintain master fund list in coordination with BISYS Legal Admin 
  17.  Prepare and maintain Business Summary for Board meeting 
  18.  Oversee authorized participant ETF handbook updates and dissemination
  19.  Oversee ISDA Master Agreement process and related documentation
  20. Legal accounts payable administration
  21. Other duties as assigned

Education and Experience:

  • Familiarity with mutual funds and mutual fund regulation. 
  • Current and recent experience over the last 3-5 years within the mutual fund/financial services industry 
  • 7+ years of Law Firm or in-house paralegal experience

            Must include experience working with and/or supporting attorneys

            Knowledge and experience with Investment Company Act of 1940 and Securities Act of 1933 is required

            Paralegal certification a plus

      Knowledge of Mutual Fund Operations preferred

 

Knowledge, Skills and Abilities:

        Time management skills and ability to balance competing priorities

        Outstanding written and verbal communication skills, including persuasive and analytic abilities

        Effective interpersonal skills, excellent judgment, strong self-initiative and resourcefulness.

        Outstanding organizational skills

        Research skills, critical thinking skills and detail oriented

        Highly motivated and able to work independently

        Ability to work in a cross-functional team environment

 

Please e-mail resume and brief cover letter to: Stuart@RosenthalRecruiting.com 

Rosenthal Recruiting website has more information and ways to connect: http://www.RosenthalRecruiting.com