Blog by Bill Singer WEEK IN REVIEW

February 6, 2016

FINRA Statement Of Corrective Action Defamation Lawsuit Slams Brokerage Firm

Attendant to entering into an Acceptance, Waiver and Consent ("AWC") regulatory settlement with the Financial Industry Regulatory Authority ("FINRA"), respondents are permitted to attach to the formal AWC settlement agreement a Corrective Action Statement to demonstrate the steps taken by a respondent to prevent future misconduct subject to the understanding that such an attachment may not deny the charges or make any statement that is inconsistent with the AWC. The Corrective Action Statement does not constitute factual or legal findings by FINRA, nor does it reflect the views of FINRA or its staff.

Regular readers of the Blog know that I am no fan of Corrective Action Statements and rarely, if ever, advocate their use.  Given that the premise of an AWC is a settlement made without admitting or denying the findings, barring extreme circumstances, I don't understand why anyone would prepare a voluntary statement that tends to typically make admissions, promises to correct situations that have not necessarily been acknowledged, and, in the end, simply draws more undesired attention to the matter. If you feel compelled to attach a Corrective Action Statement, then you may want to pause before signing the AWC and ask yourself if you might not be better advised to argue your case before a Hearing Panel and, if necessary, on appeal afterwards. The recent civil lawsuit of F. Chet Taylor, Plaintiff, v. Feltl and Company, Inc. Defendant (State Of Minnesota District Court, County of Hennepin, Fourth Judicial District, September 30, 2014) confirms my fears and underscores the soundness of my legal counsel. READ

Morgan Stanley Hit With Punitive Damages In Customers Arbitration

Three public customers sued FINRA member firm Morgan Stanley Smith Barney for $1.28 million in damages. After arguing their case before a FINRA Arbitration Panel, the customers emerged victorious. The arbitrators not only awarded punitive damages but also chastised Morgan Stanley for having a hiring process that failed to "vet" the purportedly responsible but unnamed registered representative. Notwithstanding all of that, Blog's Bill Singer is troubled by the FINRA Arbitration Decision. Bill offers you a direct link to the FINRA Arbitration Decision and asks you to judge for yourself. Is it time for industry reformers and public-customer advocates to demand more? READ

Brokerage Firm Censured And Fined For Undetected Statutorily Disqualified Rep

When you do something "wrong" there are, at times, consequences -- unless, of course, you get away with what you're doing wrong because you don't tell anyone and no one finds out. More often than not, however, we get caught when we fail to do what we're supposed to do. In today's Blog, we consider some of the rules and regulations that come into play when you work on Wall Street and the wrong that you committed is deemed so serious as to subject you to ineligibility -- or, as better known in the lingo of the biz: a statutory disqualification. Then there's the hapless tale of one FINRA member firm, which was put on notice of an employee's likely statutory disqualification but sort of failed to follow up. READ

On January 31, 2015, the Securities and Exchange Commission ("SEC") announced that it had entered into settlements with Barclays Capital Inc. and Credit Suisse Securities (USA) LLC concerning those firms' alleged operations of alternative trading systems, so-called "Dark Pools." Separately, the New York Attorney General announced parallel actions against those same firms. Barclays settled through its admission of wrongdoing and will pay $35 million penalties each to the SEC and the NYAG ($70 million total). Credit Suisse will pay a $30 million penalty each to the SEC and the NYAG ($60 million total), and $24.3 million in disgorgement and prejudgment interest to the SEC for a total of $84.3 million. READ the FULL TEXT SEC OIPs on

BrokeAndBroker's publisher and Wall Street veteran reformer Bill Singer is not going to waste his time by offering extensive analysis and commentary on yet another high-priced industry settlement with yet another recidivist violator. Bill notes that this settlement is nothing more than check-book regulatory diplomacy, a strategy that has demonstrated no efficacy in deterring any Wall Street misconduct by any major bank or brokerage firm.  One has to wonder how quickly the SEC will be granting Barclays and Credit Suisse another round of waivers from the provisions of the SEC's rules that would make those firms ineligible for well-known-seasoned-issuer status or disqualified for safe harbor treatment or under the so-called Bad Actor provisions. READ

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FINRA Impounds Stockbroker Over Used Car Biz Loans From Customer

The first mistake was when the stockbroker borrowed money from a customer. The second mistake was using some of the loan proceeds to go into a used-car business but not notifying the employer brokerage firm about the outside activity. The third mistake was failing to timely repay the customer. The fourth mistake . . . well, to be cynical, that would be when the stockbroker got caught. READ