Customer's Oddball ETF UIT Guarantee Allegation Proves A Winner

November 20, 2012

A picture taken on February 8, 2011 in Rennes,...

Sometimes Justice doesn't laugh at what strikes us funny

In a Financial Industry Regulatory Authority Arbitration Statement of Clai filed in November 2010, Claimant Fanelli sought unspecified damages, costs, and interest arising from fraud in the inducement; negligent misrepresentation; and, negligent training and supervision. In the Matter of the FINRA Arbitration Daniel R. Fanelli, Sr., Claimant, vs. Chase Investment Services Corp., a Delaware for profit corporation f/k/a WaMu Investments, Inc., Respondent (FINRA Arbitration 10-05395).

Respondent Chase generally denied the allegations and asserted various affirmative defenses.

SIDE BAR: According to online FINRA regulatory records as of 11/20/2012, this case involved a dispute pertaining to:


Frankly, not that dramatic a case or rare set of facts. Ya got yer unhappy camper of a customer blaming the brokerage firm for what appears to have been a trade(s) gone sour.  Except, you know, I don't necessarily do plain old vanilla in "Street Sweeper." What caught my attention about this case was this intriguing recitation in the FINRA Arbitration Decision:

Respondent's alleged false representation to Claimant that Claimant could sell some or all of the securities in his account at any time with an option to repurchase the sold securities at the same price at which they were sold within sixty days of the date of sale.

Umm . . . what?

This claimant public customer alleged that the respondent brokerage firm asserted that after the customer sold positions in his account that he could buy back those sold positions within sixty days at the original sale price.  As in, we got you covered? As in, we're in the insurance business and you can't lose? As in, if you sell this ETF or UIT at $55 and it skyrockets to $155 within a month or so, we'll let you buy back the position at the $55 price, provide you exercise that option within 60 days of the sale.

As in, you gotta be kiddin' me?

Without question, this case is headed for a crash and burn and vindication for WaMu now Chase Investment Services because who the hell would ever tell a public customer such nonsense?i

Ahhhh, but life is still full of surprises and sometimes the most inane things come out of a stockbroker's mouth!

The FINRA Arbitration Panel found Respondent Chase  liable for fraud in the inducement and ordered the firm to pay to Claimant Fanelli $36,000.00 (pre-judgment interest specifically denied) and $250 filing fee reimbursement.

Bill Singer's Comment

I got nuthin' else to give you on this one, sorry. What exactly was said by whom, dunno. Did the Panel find convincing proof that the firm proposed the 60-day guarantee - seems so. What are the critical facts? Dunno.   The Decision titillates us but doesn't offer any further explanation or rationale.  On the other hand, c'mon, admit it: You didn't see this verdict coming.