May 9, 2014
There's right. There's wrong. There's standing on your principles but that comes with the financial cost of such a principled defense. Such is the stuff that either leads to a case being tried or, in the alternative, a case being settled. How the various parties weigh the relative merits of their positions and opt to proceed is rarely a scientific approach replete with formulas. If anything, it's part hurt feelings, part revenge, part anger, and part what's it gonna cost me. In today's BrokeAndBroker Blog we have the opportunity to look back at a customer dispute and ask ourselves whether this is a case that should have been tried or settled, and whether the facts indicate the customer was wronged by the stockbroker or vice versa. It's anyone's guess. At best this is merely an exercise without a conclusion; however, one day you may find yourself in the shoes of the unhappy customer or angry stockbroker. Come away with whatever lessons you will.
The Variable Annuity Dyspepsia
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in September 2013, public customer Claimant Kneidel was apparently unhappy with his purchase of a variable annuity ("VA") and he alleged causes of action against his former stockbroker Respondent Sen for suitability, misrepresentation, breach of fiduciary duty, negligence, and violation of state securities law. Claimant sought $5,842.55 in compensatory damages plus interest and costs.In the Matter of the FINRA Arbitration Between Stephen Kneidel, Claimant, vs. Sunandan Sen, Respondent (FINRA Arbitration 13-02778, May 1, 2014).
SIDE BAR: Okay, listen -- I know that FINRA prefers that its arbitrators issue relatively terse decisions without a ton of background and practice brevity when it comes to setting forth the rationale for their rulings. Many folks think that's the best approach for publishing decisions involving so-called private alternative dispute resolution cases. As frequent readers of the BrokeAndBroker Blog know, however, I am not in that camp.
In Kneidel, there is no assertion in the Decision that Respondent Sen denied (generally or specifically) Claimant's allegations. There is no assertion that Respondent raised any affirmative defense. Given that the Decision indicates that he was represented by a law firm, I'm going to go out on a limb here and assume that not only did his lawyer submit a well drafted Answer but that said pleading included the standard denials and defenses.
And The Answer Is . . .
The sole FINRA arbitrator found Respondent Sen liable and ordered him to pay to Claimant Kneidel $5,842.55 plus 9% per annum interest accruing 30 days after the date of the Award.
Dunno. And, puhlease, don't ask me because there is nothing in the Decision that even remotely parades as an explanation.
Bill Singer's Comment
A few things caught my attention about this mere whiff of a case.
First off, public customer Claimant Kneidel was represented by "Howard S. Meyers, Esq., New York Law School Legal Services, Inc., New York, New York," which likely means that Claimant was represented by law students supervised by Professor Meyers at the New York Law School Securities Arbitration Clinic. Consequently, Claimant likely got pro bono representation from a well respected arbitration attorney and from one or two zealous law students under his supervision. For a public customer, it's hard to imagine a better set of circumstances than free legal representation provided by a veteran lawyer and his students -- it's also something that an industry respondent should factor into any decision about whether to try or settle a case being handled on those terms.
Why didn't this case settle? Who knows. Maybe the public customer wouldn't take a penny less than his full demand and/or wanted to jerk around his former stockbroker. Similarly, maybe the respondent stockbroker was outraged by the claim and truly believed that he would be exonerated -- or maybe figured that he could best a couple of law students. Again, who knows?
What I can offer to you by way of content and context missing from the Decision is the following information found in online FINRA records as of May 9, 2014, which indicates that FINRA member firm FS Securities Corp filed this explanation of the "Allegations" involving Kneidel's then pending customer dispute seeking $5,842.55 in damages:
CLIENT ALLEGES THE SALE OF A VARIABLE ANNUITY WAS UNSUITABLE. VA WAS SOLD IN 2007. CLIENT ALLEGES REP INFLATED INVESTABLE WORTH AND RISK TOLERANCE
The "Broker Statement" attributable to registered representative Sen on that same FINRA online record indicates the following explanation:
THE REP BELIEVES THE COMPLAINT TO BE FRIVOLOUS AS THE CLIENT INVESTED APPROXIMATELY $75,000 IN SEPT 2007 AND RECEIVED BACK APPROXIMATELY THE SAME AMOUNT IN AUG 2013. THE REP FULLY INFORMED THE CLIENT OF INVESTMENT RISK. NONE OF THE INVESTMENTS CARRIED A CDSC AFTER 2008. THE REP BELIEVES THE CLIENT IS ANGRY BECAUSE THE CLIENT WAS TOLD TO FIND ANOTHER REP IN JULY 2013