You read the official version of virtually anything and you would like to believe that you've gotten the low-down. Well . . . come to think of it . . . that's ridiculous.  These days, nearly anything presented to us as "official" elicits a healthy dose of doubt and skepticism. Perhaps that's how it should be. In a recent FINRA Arbitration Decision, we see an example of the divergence between what an official explanation of a dispute presents to us and how some additional facts and nuances alter the true picture. No -- the Decision didn't lie or grossly distort anything; to the contrary, it is accurate in terms of what it says. It's what's missing from that report, it's what is alluded to but not fully explained that's a problem.  It's more a matter of sharp focus than something not in the field of view. 

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in November 2011, associated person Claimant Engelbrecht alleged breach of fiduciary duty, failure to supervise, and suitability in connection with the alleged recommendation and purchase of Rocky Mountain Enterprises. Claimant, who represented himself pro se, alleged that unnamed former Group Vice President Max Roth "used his influence and position to solicit this unauthorized "high risk" investment, which occurred while Claimant was employed at Ameriprise.  Claimant sought compensatory damages of $500,000. In the Matter of the FINRA Arbitration Between James Engelbrecht, Claimant, vs. Ameriprise Financial Services, Inc., Respondent (FINRA Arbitration 11-04417, September 24, 2014).

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

A Moving Experience

In July 2012, Respondent filed a Motion to Dismiss, which Claimant opposed. 

In November 2012, Claimant notified FINRA that he had filed a petition to reopen his bankruptcy case in order to amend his application in order to allow for any FINRA Arbitration award. In response to Respondent's advisory about having filed for bankruptcy, Respondent filed a Motion to Stay the Arbitration Proceeding. On February 15, 2013, the FINRA Arbitration Panel stayed the proceeding.

Around February 27, 2013, Claimant moved to reopen his arbitration and subsequently submitted to the Panel a copy of the bankruptcy court's  Order Reopening Case To Administer Asset. In response to Respondent's opposition, the Panel denied the motion until such time that the court or the Bankruptcy Trustee actually acted on Claimant's claim. Ultimately, in October 2013, the Panel granted the motion to remove the stay in response Claimant's submission of a Trustee's Statement of Abandonment, September 5, 2013.

In December 2013, Respondent filed a Motion to Dismiss, which Claimant opposed. Although the Panel denied the dismissal motion in February 2013, it was only by a vote of 2:1.

At the FINRA Arbitration Hearing, Respondent again moved to dismiss. This time the Panel granted the dismissal based upon its finding that "as an employee, Claimant failed to prove Respondent owed him a duty of due care."

Bill Singer's Comment

In the end, this Arbitration fizzles out.  Claimant started the litigation. Then it got stayed for some bankruptcy stuff. Then the contest was reopened. Then the games came to a shortened end when the Panel dismissed the claims for what boils down to a lack of proof.

Unfortunately, notwithstanding the early dismissal, the FINRA Arbitration Decision does not do justice to the substantive issues and the nuances that make this a fascinating dispute.  In its unceasing efforts to dig where others have not, to delve where others have not, to uncover where others have not, to expose . . . well, okay, enough with the hyperbole, please consider all this interesting stuff that BrokeAndBroker.com found:

Online FINRA documents as of October 3, 2014, disclose that Respondent Ameriprise had characterized the allegations in this arbitration as:

Online FINRA records disclose that unnamed party Maximilian Roth was first registered in 1977 and has no disclosable regulatory or customer complaint matters. Additionally, online FINRA documents indicated that Roth had responded to Claimant Englebrecht's allegations with this statement:

Online FINRA records disclose that "James Milton Engelbrecht" was first registered in 1995. In addition to five complaints from 2002 through 2010 under the heading "Customer Dispute - Closed-No Action/Withdrawn/Dismissed/Denied," there are additional disclosure under "Customer Dispute - Settled":

1. An October 12, 2009, claim for $169,239 in compensatory damages and $100,000 in punitive damages for allegedly unsuitable investments including writing covered calls.The matter settled on May 16, 2011, for $8,000.
2. An April 26, 2007, claim for $285,000 for allegedly unsuitable and risky investments using $350,000 in proceeds from customers' sale of their business. The matter settled on May 20, 2008 for $22,000. Engelbrecht was purportedly dismissed from the case and did not contribute to the settlement.
3. A May 13, 2004, claim for unspecified damages that alleged that in mid-1999, the customers had purchased $200,000 in what they characterized as investments not in keeping with their desire to "maintain low risk investments." Customers also sought unspecified punitive damages. On August 1, 2005, the matter settled for $80,000 and Engelbrecht was purportedly dismissed from the case and did not contribute to the settlement.
4. An August 8, 2002, claim alleging suitability, churning, breach of fiduciary duty, and negligence starting in 1999. Customer sought $286,612.00. On August 26, 2003, the matter settled for $150,000 and Engelbrecht purportedly did not contribute to the settlement.