Here we go, yet again, with an all too common fact pattern.
One, a public customer sues a brokerage firm but doesn't name the individual stockbroker allegedly involved. In the nuance of arbitration parlance, the broker is a "Subject" but not a named "Party."
Two, the customer settles with brokerage firm.
Three, the unnamed stockbroker still has a regulatory reporting trail that will haunt him or her - despite not having been named as a Respondent, not participating in the settlement, and, well, you know, there's all that fuming about how unfair and un-American this is.
As to the specifics, in February 2010, public customer Claimant Abramovitz filed a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim against Respondent Wells Fargo Advisors alleging various causes of action including fraud, unsuitability, failure to supervise, and unauthorized trading relating to Kinetics Small Cap, Hillman Capital All Cap and Wentworth International Growth ADR managed funds. Claimant sought $130,000.00 in compensatory damages, pre and post-award interest, costs, expenses, attorney's fees, expert's fees, forum fees, and punitive damages.
In the Matter of the FINRA Arbitration Between Carole Abramovitz, Claimant, vs. Wells Fargo Advisors, LLC , Respondent (FINRA Arbitration Case Number: 10-00492, July 7, 2011)
Respondent Wells Fargo generally denied the allegations, asserted various affirmative defenses, and asked for the expungement of the Central Registration Depository records ("CRD") of unnamed parties Alan Jusko and Kevin Jusko.
In June 2011, prior to the arbitration hearing, Claimant voluntarily dismissed her unauthorized trading claim. Thereafter, Claimant and Respondent entered into a confidential settlement agreement pursuant to which Claimant agreed to dismiss all claims with prejudice.
Now, I want you to consider this verbatim quote from the FINRA Arbitration Decision:
Claimant admits that the Statement of Claim is clearly erroneous and supports Respondent's request for the relief requested including expungement.
Claimant admits that her claim is clearly erroneous. Let me just highlight that point.
According to the FINRA Arbitration Decision, after filing a FINRA Arbitration claim, the Claimant admitted that her allegations were erroneous - no, actually, it's not even that benign; it's that her claim was CLEARLY erroneous. Under such circumstances, its understandable that Claimant would support the requested expungement of the Juskos' CRDs.
The FINRA Arbitration Panel conducted an expungement hearing, which Claimant did not attend but supported, and subsequently recommended the expungement of the Juskos' CRDs. I want you to fully digest and chew on this explanation, which I quote, verbatim, from the Arbitration Decision:
Alan Jusko and Kevin Jusko testified at length with reference to exhibits to the Answer to the Statement of Claim, as well as additional account opening documents, account statements, and due diligence in connection with the money managers recommended to Claimant. The Juskos described in detail the history of their relationship with Claimant, an attorney, and described in detail two meetings that were held with Claimant and her husband, a CPA, prior to the opening of the managed accounts at issue. The Juskos explained that, at that meeting, Claimant informed them that she would have no need for income from her investments and that she intended to continue to work full time. The Juskos provided Claimant with materials concerning each of the money managers with which she ultimately invested and repeatedly advised Claimant as to the risks of the investments. The Juskos both testified that the investments were suitable for Claimant given her expressed tolerance for risk and her financial situation. Moreover, during the time that Claimant maintained the accounts at issue, she spoke directly with certain of the money managers to discuss her investments. The Juskos further explained that Claimant's losses were the result of the unprecedented market collapse in 2008 which they could not have foreseen.
I'm going to try and restrain and constrain myself while writing this conclusion. In order to accomplish that, I'm simply going to present some bullet-points for your consideration:
Maybe there's far more to this case than is reported in the official FINRA Decision. Unfortunately, I have no idea what the terms were in the Confidential Settlement between Abramovitz and Wells Fargo. Similarly, at this point, the matter is settled, the settlement is confidential, and there's little to be gained by asking each side for their versions of the facts. Nonetheless, solely going on what's reported, the Juskos seem to have had their names dragged through the mud for no good reason. Sure, you can turn over your pencil and erase the error that you made. Blow the wisps off the page and move on. I just don't think that's a satisfactory way to fairly redress the harm in this case.