In a FINRA Arbitration Statement of Claim filed in June 2009, public customers Francis and Anne Flannery asserted causes of action in breach of contract, negligence, and negligent supervision arising from unspecified transactions involving Merrill Lynch common stock.The Claimants sought compensatory damages of between $2,- and $3 million; plus an additional $1 million in punitive damages, fees, etc. In the Matter of the Arbitration Between Francis X. Flannery and Anne S. Flannery, Claimants vs. Merrill Lynch, Pierce, Fenner & Smith, Inc. Respondent (FINRA Arbitration Number: 09-03651, November 5, 2010).
Not Named But Not Forgotten
Respondents generally denied the allegations, asserted affirmative defenses, and requested expungement of this arbitration from unnamed party Michael Duke Laitman's Central Registration Depository ("CRD") record.
The FINRA Arbitration Panel denied Claimants' claims in their entirety and recommended the expungement of all reference to the arbitration from unnamed party Laitman's CRD record. After considering the testimony of the Claimants and of Laitman, the FINRA Panel determined that the claim was without merit, and that there was no actionable wrongdoing by Laitman. Moreover, the Panel concluded that the Claimants were making their own investment decisions and were completely aware of the risks.
In accordance with Notice to Members 04-16, Laitman must obtain confirmation from a court of competent jurisdiction before the CRD will execute the expungement directive. Unless specifically waived in writing by FINRA, parties seeking judicial confirmation of an arbitration award containing expungement relief must name FINRA as an additional party and serve FINRA with all appropriate documents.
Bill Singer's Comment: How do you get an unnamed party in a FINRA Arbitration? For starters, Claimants can allege in their FINRA Statements of Claim that Mr. X their Broker did this, Ms. Y the Branch Manager did that, and Mr. Z the Chief Compliance Officer failed to supervise Mr. X and Ms. Y -- however, when it comes time to actually entering the names of the individuals in the Respondent's capiton of the formal Statement of Claim, the attorney for the Claimant may opt to only enter the name of the deep-pocketed brokerage firm and not the referenced individuals.
Nonetheless, having been named in the body of the Claim (if not the caption), Mr. X, Ms. Y, and Mr.Z may still be deemed for regulatory reporting requirements as having been "named" as a party in the arbitration and/or may still have regulatory reporting requirements pertaining to their alleged misconduct.
Regardless, FINRA's policy here is somewhat less than fair. In the case of Laitman -- and numerous other Laitman-like unnamed respondents -- he needed to have an advocate at a hearing in which he was not a named party make a motion to clear his name on CRD. Further, depending upon the largesse of the named employer, Laitman may or may not have to incur personal legal expenses when he seeks to obtain confirmation.