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FINRA Arbitration Panel Hits Losing Customer Claimants With Sanctions
Written: July 14, 2010

In a FINRA Arbitration Statement of Claim filed in March 2009, Claimants Kenneth J. and Penelope Iwanicki alleged that Respondents Richard and Robert Lewin (the "Lewins") made misrepresentations and purposeful omissions of material facts concerning high risk stocks in Claimants’ accounts at Respondent Basic Investors, Inc.  Claimants alleged that the Respondents Lewins enaged in hundreds of unauthorized tranasactions for the sole purpose of generating commissions and advised Claimants to purchase unsuitable securities given their stated risk tolerance and financial goals.  Further, Claimants alleged that Respondent Penson served as Respondent Basic’s clearing house and, as such, had an oversight responsibility for all the cited trading.   Claimants sougth $1,300,000 in compensatory damages; $4,000,000 in punitive damages, $3,900,000 in treble damages, $750,000 in other relief, and unspecified attorneys’ fee, costs, etc. In the Matter of the Arbitration Between Kenneth J. Iwanicki and Penelope Iwanicki, Claimants, versus Richard Lewin, Robert Lewin, Basic Investors, Inc., and Penson Financial Services, Inc., Respondents. (FINRA Arbitration 09-01494, June 29, 2010)

Respondents generally denied the allegations and asserted the following defenses:

  • The Lewins did not undertake a new investment strategy that was inconsistent with the Claimants’ ojectives or capacities, and the Lewins did not act in an manner inconsistent with the Claimants’ instructions.  All of the Lewins’ recommendations to Claimants were based upon a good-faith evaluation of what, at the time, was an “historically difficult market,” and in full recognition of Claimants’ personal sitatuion.
  • Respondent Penson asserted that Claimants had failed to state a claim upon which relief can be granted; that Claimants did not suffer any damages resulting from any acts/failures to act by Penson; that the claims are barred in whole or part by comparative/contributory negligence, and that Penson acted in good faith.  Finally, Penson raised the defenses of waiver, ratification, or estoppel.


In November 2009, Respondent Penson filed a Motion to Dismiss that was to be considered at the conclusion of Claimants’ case-in-chief.

In December 2009, Penson filed a Motion for Sanctions, which the Panel denied in February 2010. 

Claimants appeared at a January 19, 2010 hearing by phone and sought a continuance, which the Panel granted.  At the hearing, the Panel denied a Motion to Dismiss by Respondents Lewins and Penson .

Around January 21, 2010, Penson filed another Motion fo Sanctions based in part on Claimants’ alleged failure to comply with the Panel’s discovery order and for failure to appear at the final hearing on January 19-22.  In its Order dated February 11, 2010, the Panel granted the Motion for Sanctions and found Claimants jointly and severally liable to Penson for $12,069.03.  The Panel further ruled that the reconvening of the final hearing would be predicated upon prior payment of that award.

Around February 1, 2010, the Respondents Lewins filed a Motion Regarding Rescheduling Hearing Conditions, which requested expense reimbursement for the postponed January 19-22 hearing dates as yet another condition precedent to reconvening the final hearing.  By Order dated March 6, 2010, the Panel found Claimants jointly and severally liable to the Lewins for $12,588.26 but denied making full payment a condition precedent to the reconvening of the hearing.  However, the Panel precluded each and every party from calling as a witness anyone not listed on that party’s December 2009 witness list, unless all parties agreed to the contrary or upon a showing of good cause, or as required by the Code of Arbitration.

At the reconvened June 14, 2010 hearing, Claimants moved to again adjourn the hearing until their expert witness was available. The Panel denied the request but permitted telephonic testimony by the expert.  At the June 15, 2010 hearing, Respondent Penson moved to bar Claimants’ expert from testingy about clearing firms, which was also denied by the Panel.

At the June 15, 2010, Claimants moved for a default against Respondetn Basic Investors, Inc., which was not represented at the hearing. The Panel denied the Motion.

At the conclusion of Claimants’ case-in-chief on June 15, 2010, the Respondents Lewins moved to dismiss.  The Panel granted the Motion.

FINRA Arbitration Panel Decision

Finally the Panel dismissed all remaining claims of Claimants and ordered them to pay the previously awarded sanctions of $13,069.03 to Penson and $12,588.26 to the Lewins.

A Personal Message from Bill Singer ---

The Financial Industry Regulatory Authority (FINRA) has just distributed its Proxy for the Annual Meeting of FINRA Firms on August 12, 2010. As to the eight propositions on the ballot, FINRA's representatives will vote "NO" on items #2 through #8 in the absence of your voting instructions. 

FINRA member firms cannot defer these critical choices to the self-regulator and its supporters.  A failure to ensure that your voice is heard -- now, this year -- is irresponsible.  Your career and your business are at stake. 

You complained about the ongoing destruction of the independent/regional community, but the agenda catered to the big boys and the too-big-too-fail.

The compensation of FINRA's top regulators rose to astronomical heights, but no one would timely return your calls when you needed help. 

You watched in shock as FINRA's cronies circled the wagons and prevented meaningful reform of an inept bureaucracy -- and you were outraged when many of those same pals were appointed to boards, panels, committees, and subcommittees.

Now is the time to say "enough."

Proposition #1

I urge you to reject those individuals nominated by FINRA's National Nominating Committee (designated "FINRA Nominee").  Please vote for the individuals listed under the "Nominee by Petition" heading:

FIRST CLASS:  Howard Spindel or Ken Norensberg (only vote for one of these two)

SECOND CLASS: Joel R. Blumenschein


PROPOSITIONS #2 through #8

I urge you to vote "YES" for each and every proposition noted below:

2. Disclosure of Compensation of FINRA’s Top Ten Most Highly Compensated Employees

3. Independent Study of Current and/or Former FINRA Officer and/or Director Involvement with the Madoff Family

4. Transparency of FINRA Investment Policies, Practices and Transactions.

5. FINRA Board of Governors Meetings Should Be Made Public Except When Absolutely Necessary.

6. “Say on Pay” for Top Five Most Highly Compensated FINRA Employees.

7. Creation and Employment of an Independent Private Sector Inspector General.

8. Disclosure of IRS Correspondence Concerning $35,000 NASD Member Payment.


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