Following former associated person Jonathan Ted Marcu’s termination of his employment (apparently pursuant to a voluntary resignation by Marcu),  a dispute arose concerning the repayment of a promissory note (Note) and monies owed; and, as a result, his former employer, SMH Capital, Inc., filed a FINRA Arbitration Statement of Claim against Marcu. In the Matter of the Arbitration Between SMH Capital Inc., Claimant, versus Jonathan Ted Marcu, Respondent (FINRA Arbitration 08-04963, May 3, 2010).  Claimant SMH sought $112,500 in compensatory damages with interest at the rate of 5%, reasonable attorneys’ fees, expenses, and costs.

Loading for Bear?

Respondent Marcu denied the allegations and asserted affirmative defenses including: 

• Claimant failed to state a claim upon which relief could be granted;
• Claimant rendered Respondent contractually unable to perform under any employment agreement and/or the Note;
• Claimant affirmatively committed acts that constructively discharged Respondent from further performance under the Note and made him unable to perform without breaching the Note;
• Respondent was fraudulently induced into entering into an employment agreement and the Note;
• Claimant is stopped from enforcing the Note as a result of its acts, commissions, representations, and course of conduct, and for maintaining a position inconsistent with one which it had previously taken;
• Claimant was barred from recovering attorneys’ fees or costs;
• Respondent was entitlted to a set-off for losses incurred as a result of Claimant’s conduct
• Claimant breached the covenant of good faith and fair dealing in any agreement and/or promissory note;
• Claimant failed, in the conduct of its business, to observe high standards of commercial honor and just and equitable principles of trade as required under FINRA Rule 2110; and
• Claimant failed to attach any agreement and/or promissory note to its Statement of Claim.

Let's All Settle Down

By the end of March 2010, the parties settled the matter and submitted a Stipulated Award, which was entered by the FINRA Arbitration Panel, which could be confirmed by a court in the event of Respondent’s failure to comply with the terms of the Settlement Agreement. The Settlement Agreement calls for the payment of $37,800 by Respondent, as follows: 

• Beginning April 15, 2010: $  7,200 paid in $200 monthly installments for 36 months;
• Beginning April 15, 2013: $12,600 to be paid in quarterly installments of $1,050 for three years; and
• Beginning April 15, 2016: $18,000 to be paid in quarterly installments of $1,500 for three years.  

Should Respondent default on the above payments, he will be liable for the sum of $85,000 minus an offset for any payments made. He will be further liable for post-judgment interest on the unpaid balance plus reasonable attorneys’ fees/expenses incurred in confirming and entering any default judgments.

Bill Singer's Comment:

Read this case in connection with
http://www.brokeandbroker.com/index.php?a=blog&id=397. 

Claimant SMH's initial claim was for $112, 500 plus interests, fees, etc. The settlement of this matter resulted in Claimant accepting a worst-case scenario (that is, in the event that Respondent Marcu defaults on the settlement) of $85,000 plus court-related costs/fees, but a best-case scenario (that is the Settlement Agreement is honored) of $37,800.  Although the settlement results in about a 67% discount for Respondent, it likely will ensure that Claimant realizes something and the resolution was effected in a manner that may hopefully avoid Respondent's loss of his career.  All in all, a sensible and professional resolution.  Best of luck to all involved.

SPECIAL NOTICE!!!

The annual meeting of FINRA firms will take place on or about Monday, August 2, 2010, to elect individuals to fill the seven Elected Governor seats on the FINRA Board of Governors (FINRA Board). http://www.finra.org/Industry/Regulation/Notices/2010/P121377 .

There are

• three (3) Small Firm Governor seats,
• one (1) Mid-Size Firm Governor seat, and
• three (3) Large Firm Governor seats up for election.

Ever so kind and helpful , FINRA has its own nominating committees and they haved come up with a recommended slate of nominees.  The best and the brightest culled from the ranks of thousands of registered folks and member firm executives. Or so those nominating committees would like you to think. Or so we would all so desperately hope.

Time for a FINRA Tea Party?

Alas, I've seen the lists of the official nominees.  I despair. http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p121378.pdf 

Like some frightening Boys from Brazil, the FINRA nominating committees have gone back to the same gene pool that produces the same lookalike, soundalike offspring from the same trade groups and member firms.  In times that demand a shift into forward or reverse, we will be stuck in neutral with an idling engine.

If now is not the time for substantive, meaningful change on Wall Street, then when is? 

Incompetent regulation and inept regulators must be replaced by progressive, pragmatic policies and executives who will prevent a recurrence of the recent industry debacle.  Now is the time for your voice to be heard at FINRA. 

Organize!  Mobilize!! Nominate Your Own Independent Candidates!!!

Here are the steps you need to take:

FINRA Petition Process for Additional Candidates

Pursuant to Article VII, Section 10 of FINRA’s By-Laws, a person who has not been nominated for election to the FINRA Board may be included on the ballot for the election of governors if:

(a) within 45 days after the date of this Election Notice, such person presents to the Secretary of FINRA petitions in support of such nomination, duly executed by at least three percent of FINRA member firms entitled to vote for such nominee’s election. If, however, a candidate's name appears on a petition in support of more than one nominee, the petition must be endorsed by 10 percent of FINRA’s voting member firms entitled to vote for such nominee’s election;

and

(b) the Secretary certifies that such petitions have been duly executed by the executive representatives of the requisite number of FINRA member firms entitled to vote for such person’s election, and the person being nominated satisfies the classification of the governorship to be filled based on the information provided by the person as is reasonably necessary for the Secretary to make the certification.

As of the close of business on Monday, May 3, 2010, the number of FINRA Small Firms, was 4,324; the number of Mid-Sized Firms was 214; and the number of Large Firms was 176.

Firms may only endorse a petitioner for the same firm size seat as their own and, in the case of petitions, solely in support of a single nominee. No firm may endorse more than one such nominee. Likewise, a firm that signs a petition in support of more than one nominee may not submit a petition in support of an individual nominee. In this election, there are three separate Small Firm and three separate Large Firm seats.

The petition must identify the seat for which the petitioner is seeking to be nominated. The petitioner must submit sufficient information to determine the person’s status with respect to the category for which he or she is petitioning to be nominated. The petitioner must also provide information sufficient for the Corporate Secretary to determine that the petitions are duly executed by the executive representatives of the requisite number of applicable size firm members.

Petitions must be submitted no later than Friday, June 18, 2010.

The names of persons obtaining the requisite number of valid petitions will be included on the appropriate proxy mailed to eligible firms in advance of the annual meeting.

Voting Eligibility

A proxy will be mailed, along with the notice of the annual meeting, to each eligible FINRA firm prior to the annual meeting.

Firms are eligible to vote for the nominees who are running for seats that are in the same size category as their own firm. Therefore, Small Firms and Large Firms may vote only for the candidates running for the seats reserved for their firm size, and Mid-Size Firms will likewise vote only for the Mid-Size Firm seat.

FINRA will verify the size of each firm on the day the proxies are mailed. Each firm eligible to vote will receive a proxy containing the nominees for their voting class.

http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p121378.pdf