Mimsy FINRA Borogoves Defeat Frumious Expungement Bandersnatch

June 19, 2014

Twas brillig, and the slithy toves did gyre and gimble in the wabeAll mimsy were the borogoves, and the mome raths outgrabe as two industry parties swung at each other with deadly vorpal swords during a frabjous day of Financial Industry Regulatory Authority ("FINRA") intra-industry arbitration hearings. What the hell is Bill Singer talking about in today's BrokeAndBroker Blog? We're not sure -- but it certainly seems like he's upset again with a FINRA Arbitration Decision that doesn't make a lot of sense.

Manxome Foes

In a FINRA Arbitration Statement of Claim filed in November 2012, registered person Claimant Stoopler asserted that Respondents had entered incorrect and defamatory remarks on his Uniform Termination Notice For Securities Industry Registration ("Form U5") . Claimant sought an expungement, $100,000 in compensatory damages, punitive damages, attorney's fees, and costs. At the close of the hearing, Claimant sought $1,000,000 in compensatory damages and $3,000,000 in punitive damages. In the Matter of the FINRA Arbitration Between Julian Irwin Stoopler, Claimant, vs. Westminster Financial Securities, Inc. and Lawrence Miles Brazie, Respondents (FINRA Arbitration 12-04106, June 12, 2014).

Respondents generally denied the allegations and asserted various affirmative defenses.

Whiffling Through The Tulgey Wood

The Sole FINRA Arbitrator dismissed with prejudice all claims against Respondent Brazie,

The FINRA Arbitrator found Respondent Westminster Financial Securities liable for Form U5 defamation and ordered the firm to pay to Claimant:
  • $20,000 in compensatory damages;
  • 4.75% post-judgment interest starting five days after service of the Award until paid in full; and
  • $225.00 in reimbursed filing fees.
Uffish Thought

In recommending expungement, the FINRA Arbitrator found that the Form U5 statement at issue was defamatory and unnecessary: 

[C]laimant had many customers, but the testimony was only about three customers who agreed to the charges. Additionally, the sole witness on this issue stated three cents to five cents is a fair charge. . .

Okay, that's nice. Many customers -- but what's the deal with those customers; why are they mentioned? 

And those "charges" that three customers agreed to -- why should we care about those charges and what's with that three and five cent issue?

Notwithstanding all of my questions, the Arbitrator recommended that:

[T]he expungement of the Termination Explanation, filed by Westminster Financial Securities, Inc. on September 12. 2012, from Claimant Julian I. Stooplers (CRD #437507) Form U5, Item 3 maintained by the CRD based on the defamatory nature of the information. The reason for termination remains "Voluntary" and the Termination Explanation should appear blank. Explanation should appear blank. . . 

Bill Singer's Comment

I mean, seriously? 

This FINRA Arbitration case involves a multi-million dollar demand for damages arising out of purported defamation, the Arbitrator finds that the registered Claimant was defamed, the Arbitrator recommends expungement of the Form U5, but we arent told jack about anything involved in the underlying dispute.  As BrokeAndBroker Blog readers know, this hide-and-approach is often the default mode at FINRA, which publishes arbitration decisions pursuant to some policy that seems to prefer a bare-bones statement of facts and as little rationale as possible.  It's all pretty much set out in FINRA Arbitration Proceeding Rule 2014321: Intra-Industry Expungement Arbitration Decision Guidelines:

'Twas brillig, and the slithy toves
      Did gyre and gimble in the wabe:
All mimsy were the borogoves,
      And the mome raths outgrabe.

"Beware the Jabberwock, my son!
      The jaws that bite, the claws that catch!
Beware the Jubjub bird, and shun
      The frumious Bandersnatch!"

He took his vorpal sword in hand;
      Long time the manxome foe he sought-
So rested he by the Tumtum tree
      And stood awhile in thought.

And, as in uffish thought he stood,
      The Jabberwock, with eyes of flame,
Came whiffling through the tulgey wood,
      And burbled as it came!

One, two! One, two! And through and through
      The vorpal blade went snicker-snack!
He left it dead, and with its head
      He went galumphing back.

"And hast thou slain the Jabberwock?
      Come to my arms, my beamish boy!
O frabjous day! Callooh! Callay!"
      He chortled in his joy.

'Twas brillig, and the slithy toves
      Did gyre and gimble in the wabe:
All mimsy were the borogoves,
      And the mome raths outgrabe.

[with credit to Lewis Carroll and "Jabberwocky"]