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I discuss this case not because it is a major one -- it's not -- but precisely because it is a relatively minor case that involves the frustratingly recurring problem of inexplicable FINRA arbitration decisions.
Appearing without legal counsel, pro se Claimant Phillip A. Wells filed a Statement of Claim on May 5, 2009, against Respondent UBS alleging breach of contract, failure to supervise, breach of fiduciary duty, and omission of facts. Public Customer Wells complained that his investment advisor, Dennis Dixon, who was employed by UBS, failed to follow specific instructions to put stop losses on certain investments in order to avoid heavy losses. Allegedly, Dixon failed to follow his customer's stop-loss instructions and, as a result, Claimant asserts that employer UBS is liable because of its failure to supervise its employee. Claimant ultimately sought $42,217.60 in compensatory damages. In the Matter of the Arbitration Between Phillip A. Wells, Claimant, versus UBS Financial Services, Inc., Respondent (FINRA Arbitration 09-02537, May 11, 2010).
Respondent UBS generally denied Claimant's allegations and asserted affirmative defenses, among which were that it had handled Claimant's accounts properly, in good faith, in a commercially reasonable manner, and in accordance with the industry's highest standards. Further, UBS said that it was not the proximate cause of Claimant's alleged damages; and that Claimant had failed to exercise due diligence in monitoring, managing, and handling his investments.
The FINRA Arbitrator found Respondent UBS liable and ordered it to pay Claimant Wells $1,956.10 in compensatory damages.
Don't Ask . . . Please, Don't Ask
Don't ask. Seriously. don't start in with me.
Not that you wouldn't be asking me a fair question: Hey, Bill, wait a minute, if the customer won, how come the Arbitrator only awarded about 1/20th of the damages he sought?
Like I said, that's a fair question.
Wells v. UBS is yet another in a long, long line of baffling FINRA decisions. We don't know how the damages were calculated. We don't understand the rationale for the decision.
The House Always Wins
Of course, to add insult to injury, there is this other oddball aspect of this case.
Claimant Wells paid an Initial Claim Filing Fee to FINRA in the amount of $975, which FINRA retained after the decision. Also, of the $2,700.00 in FINRA Hearing Fees, Claimant was assessed $1,350.00 payable to FINRA.
Bill Singer's Comment: If you do the math, Wells won $1,956.10 from UBS, was charged $2,325.00 by FINRA, and realizes a net loss of $368.90. Why weren't all of the FINRA fees charged to the losing FINRA member firm UBS? How does a public customer win the case but wind up owing the forum more than he is awarded? Ain't mandatory FINRA arbitration grand?
Trust me, I fully understand the many fair and reasonable possible explanations about this result:
Those are all possible explanations. However, not a single explanation is provided as to how the FINRA Arbitrator arrived at a finding for Wells in the amount of only $1,956.10. Similarly, why didn't the Arbitrator see fit to negate the set-off of FINRA's Filing and Hearing Fees by imposing that burden upon Respondent UBS?
There really has to be a better way to adjudicate these cases.
Not prepared to tolerate a dastardly, hardcore card-shark in its midst, FINRA pursued Pierce for violating Rule 2110. Pursuant to a FINRA Letter of Acceptance, Waiver and Consent ("AWC") (AWC #2008015405101, March 9, 2010) Pierce offered to settle the regulatory case against him, without admitting or denying the findings. Notably, only the alleged blackjack scheme is referenced by FINRA; there is not a single reference to any alleged criminal charge, plea, or final disposition as providing the basis for jurisdiction. Frankly, that's what caught my eye about this case. FINRA was going after this kid not based upon any criminal conviction (there is none) but simply because he allegedly rigged a blackjack game.
Regulatory lawyer Bill Singer has analyzed and posted the latest crop of FINRA disciplinary cases.
Broker Ramsey served as a registered representative for an elderly customer who executed a power of attorney, giving Ramsey broad authority over her financial affairs. Ramsey used the power of attorney to obtain approximately $482,000 in withdrawals from an annuity, which, after taxes were deducted, totaled approximately $373,750. Checks for $373,750 were issued in the customer's name and sent to Ramsey's office. Ramsey converted some of the funds for his personal use and borrowed $275,000 from the customer. In total, he owes the elderly customer approximately $500,000. See what sanctions were imposed upon him
Broker Chrusciel's firm verbally warned Chrusciel that he was not permitted to use inventory accounts for personal trading and distributed a written memorandum to all employees telling them that this practice was prohibited, but Chrusciel ignored the warning and, to avoid detection, stopped using his own accounts and began allocating trades to accounts his relatives held. For some reason, one warning wasn't enough. Chrusciel's firm warned him in writing to stop using firm inventory accounts for personal trading or he would be terminated. See what sanctions were imposed upon him
While contemplating his resignation from his member firm to work at another member firm, Broker Current altered customer telephone records at his member firm without authorization in order to slow down other registered representatives who he believed would be assigned to call his customers after he resigned. You think this is an oddball violation? Think again. See what sanctions were imposed upon him
Broker Goode failed to execute a customer's instructions to liquidate positions in the customer's account, and the value of securities in the account declined precipitously with the customer incurring losses exceeding more than $1 million dollars. See what sanctions were imposed upon him
ONE OF THE ALL-TIME MOST BIZARRE FINRA CASES: Associated Person Pierce conspired with others to steal $16,000 from a casino by engaging in a scheme with a blackjack dealer to cheat. See what sanctions were imposed upon him