Majestic FINRA Customer Arbitration Decision Grapples With Non Lawyer Role

October 21, 2016

It's a rare moment but Blog publisher Bill Singer is left speechless. As is sadly the case with most lawyers, Bill is rarely at a loss for words and tends to charge a princely sum for each one he utters on behalf of a client of his law practice. As such, enjoy the silence while it lasts. As to what has stunned Bill into silence, that is the topic of today's blog. Submitted for your consideration is a FINRA Arbitration between a public customer and industry parties. The dispute is somewhat complex and a fascinating issue as to a non-lawyer's role in representing the customer arises. On top of that, the sole FINRA Arbitrator who heard the case and drafted the Decision performed at such a high level that, well, like we said, our publisher is at a loss for words.

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2015 and as amended thereafter, public customer Claimant Simon asserted suitability; churning; failure to supervise; and unauthorized trading in connection with his alleged purchase of shares in GT Advanced Technologies, Kandi Technologies, and Taser International, Inc.  Claimant sought an award of $29,806.00 in "out-of-pocket losses" and $3,500 in "case preparation." In the Matter of the FINRA Arbitration Between Jay R. Simon, Claimant, vs. Aegis Capital Corp., Robert Jay Eide, Kevin C. Meade, Nicholas Francis Milano, Anthony Michael Monaco, Sr., Jonathan Edward Rago, George Gregory Kott, and Kevin Charles McKenna, Respondents (FINRA Arbitration 15-02865, October 13, 2016).

Respondents generally denied the allegations and asserted various affirmative defenses. Respondents Milano, Rago, and Meade sought the expungement of the matter from their Central Registration Depository records ("CRD").

SIDE BAR: As set forth in the FINRA Arbitration Decision, the parties were represented as follows:

For Claimant Jay R. Simon, hereinafter referred to "Claimant": Hilton M. Weiner, Esq., Law Office of Hilton M. Wiener, New York, New York.

For Respondents Aegis Capital Corp., Robert Jay Eide, Kevin C. Meade, Nicholas Francis Milano, Anthony Michael Monaco, Sr., Jonathan Edward Rago, George Gregory Kott, and Kevin Charles McKenna hereinafter collectively referred to as "Respondents," and George Gregory Kott and Kevin Charles McKenna: Gregg J. Breitbart, Esq., Kaufman Dolowich & Voluck LLP, Boca Raton, Florida, and Rina Bersohn, Esq., Kaufman Dolowich & Voluck LLP, New York, New York.

On December 9, 2015, Claimant dismissed with prejudice Respondents George Gregory Kott and Kevin Charles McKenna.


The sole FINRA Arbitrator denied Claimant's claims because of the invalidity of Claimant's prior submissions and/or the insufficiency of Claimant's evidence.


Although Respondents Milano, Rago, and Meade had requested expungement of their CRD records in their Initial Answer, the FINRA Arbitrator declined to rule on the merits of that request because it was not reiterated by each Respondent in their Answer to the Amended Statement of Claim.

Bill Singer's Comment

At this point, regular readers of the Blog know that I typically launch into a diatribe against the lack of content and context - and quality control - in far too many FINRA Arbitration Decisions. Today, however, I ask for a standing ovation to honor a FINRA Arbitrator who, to put it simply, gets it. Compliments to FINRA Arbitrator Louis M. Parker for a superb job in explaining what happened, what he decided, and then providing an amazingly robust and compelling rationale.

The Guts of Claimant Simon's Case

For starters, consider this analysis from the FINRA Arbitrator Parker in which we clearly learn who said what about who did what to whom and how much was calculated as owing:

Findings and Conclusions re Claimant's Claims
Based on a review of all of the evidence submitted by both Claimant (notwithstanding the fact that the evidence submitted by CSAG and Ms. Tarr could be disregarded) and Respondents, the undersigned Arbitrator makes the following findings of facts and conclusions of law: 

1. During the year prior to and the year after Claimant opened his non-discretionary account at Respondent Aegis Capital Corp. ("Aegis") in 2014, he had accounts at five other brokerage firms, including the firm that Respondents Jonathan Rago and Nicholas Milano were at and who handled Claimant's account there before moving to Aegis. 

2. For his accounts at the five other brokerage firms, as well as for his account at Aegis, Claimant knowingly executed and understood the new account forms in which he stated that his net worth was over $1 million, he owned his own business and earned over $100,000.00 a year, he had over $100,000.00 in liquid assets, his investment objective was either speculation or growth, his risk tolerance was high, and in some instances, even "maximum" risk, and he understood that he could lose his entire investment as a result of his practice of short-term trading and buying high risk and speculative stocks.

3. In all of the brokerage accounts described above, Claimant traded low-priced, high risk, speculative stocks on a short-term basis, which for the most part, resulted in losses ranging from a few dollars to thousands of dollars, including the losses he incurred in his Aegis account. 

4. Claimant's trading activity in his Aegis account was essentially the same type of trading that he did in his other brokerage accounts and resulted in similar losses, which are the basis for his claims against Respondents. 

5. The three stocks that Claimant bought and sold in his Aegis account, which resulted in an aggregate loss of over $29,800.00 for which he now seeks recovery from Respondents, are the same type of speculative, low-priced stocks that he bought and sold in his five other brokerage accounts and included one of the same stocks that Claimant bought and sold for a small profit in one of his other brokerage accounts before he opened his account at Aegis. 

6. Contrary to Claimant's assertions, the credible evidence shows that Respondents Rago and/or Milano, who executed the trades of those stocks in Claimant's account at Aegis, discussed the stocks with Claimant and did not withhold any relevant information from Claimant before they executed those trades, which Claimant authorized.

7. That Claimant knew about and authorized the trades of the three stocks in question is further demonstrated by the fact that Claimant paid for all of those stock purchases after the trades were made, he never raised any objection to those trades, and he continued doing business with Respondents. Moreover, in at least one instance, Respondent Milano actually dissuaded Claimant from buying more shares of one of the stocks. 

8. Claimant traded in just three stocks in his Aegis account during a six-month period, which trades he authorized, and such trading was not out of line with his past trading history or unreasonable or unsuitable in light of his stated investment objectives and risk tolerance, which Respondents were fully aware of when those trades occurred. 

9. In light of Claimant's stated financial condition and his own trading choices and history, his total investment of approximately $50,000.00 in the stocks in question at Aegis was not overly concentrated. 

10.Based on the above facts and evidence, Claimant, who was an experienced stock trader, was a stock speculator and the stocks that were traded in Claimant's Aegis account were suitable. 

11.Under the applicable law, Claimant has not met his burden of proving the stocks in question were unsuitable, that the purchases of those stocks were unauthorized, or that Respondents churned his account, and Claimant's allegations of unsuitability, unauthorized trading and churning lack any merit. 

12.Based on the above facts, evidence, conclusions and applicable law, Claimant has not met his burden of proving that Respondents Aegis, Robert Eide, Kevin Meade, and Anthony Monaco, Sr., failed to properly supervise Respondents Rago and Milano, and Claimant's claim of improper supervision lacks any merit.

As much as I would like to nit-pick at the FINRA  Arbitrator's presentation of the underlying facts, I can't: And as attested to by this short follow-on commentary, I truly can't find anything to take issue with and I see no need to explain in my words what Arbitrator Parker has so succinctly set forth in his.

Cold Spring Advisory Group LLC

Next, let us move on the a fascinating aspect of this case; namely, the role of a non-lawyer in representing Claimant Simon:

FINDINGS:  Claimant's original and amended Statements of Claim ("SOC" and "ASOC,"
respectively) and Final Submission ("FS") were filed on October 21, 2015, March 29, 2016, and July 29, 2016, respectively, by Cold Spring Advisory Group, LLC ("CSAG") and its representative, Jennifer Tarr, which collectively was Claimant's representative until September 6, 2016.

In Claimant's ASOC and FS, Claimant alleges three causes of action against
Respondents for suitability, churning, and failure to supervise and seeks recovery of $29,806.00 for losses incurred plus "case preparation costs" of $3,500.00.
Respondents' representatives, Gregg J. Breitbart, Esq., and Rina Bersohn, Esq., both of whom are admitted to practice law in New York, but not in Arizona, and are members of the New York law firm of KAUFMAN DOLOWICH & VOLUCK LLP, filed Respondents' Answer to Claimant's SOC and ASOC and Respondents' FS, in which they deny Claimant's causes of action, both from an evidentiary and legal standpoint. Mr. Breitbart and Ms. Bersohn have represented Respondents throughout this arbitration.

You got all of that? Really?? I'm impressed. What is the Cold Spring Advisory Group,LLC? According to the home page of Cold Spring Advisory Group, LLC's website:


When brokers or brokerage firms make risky, unorthodox and sometimes illegal investments that result in avoidable loss, the investor becomes a victim of broker mismanagement or abuse.

Cold Spring Advisory (CSAG) is a stock loss recovery consulting firm specializing in reviewing, analyzing and preparing claims of stockbroker mismanagement and/or abuse.

We offer a free evaluation of monthly brokerage statements and trade confirmations to look for evidence of abuse such as churning for commissions, over concentration, unsuitability, excessive margin, unauthorized trading and other violations.

After our initial analysis, we review our findings with you and advise you on the strength of your case. If you decide to retain CSAG to assist you in recovering your losses, we will perform expert case preparation, certified forensic analysis and provide expert witness testimony to ensure you have the strongest case for maximum recovery.

In any event, taking the lineup of lawyers and non-lawyers into consideration, the sole FINRA Arbitrator provided the following analysis and rationale, in pertinent part:

Claimant's Representation
Rule 12208(c) of the FINRA Code of Arbitration Procedure provides that "[p]arties may be represented in an arbitration by a person who is not an attorney, unless ... state law prohibits such representation." (Emphasis added). "The Arizona Supreme Court has exclusive jurisdiction over the regulation of the practice of law in Arizona." State v. Eazy Bail Bonds, 224 Ariz. 227, 229, ¶ 9, 229 P.3d 239, 241 (App. 2010). Under the Arizona Supreme Court's rules, the representation of a party in an arbitration by another person constitutes the "practice of law." Ariz. Sup. Ct. R. 31(a)(2)(A)(3). By this rule, the Arizona Supreme Court prohibits the representation of a party in an arbitration conducted in Arizona by anyone who is not admitted to practice law in Arizona. See Ariz. Sup. Ct. R. 31(b). The Arizona Supreme Court provides an exception under its rules that allows a lawyer (such as Respondents' representatives who are admitted to practice law in a state other than Arizona, to represent a party in an arbitration when that arbitration is conducted in Arizona and involves federal law. See Ariz. Sup. Ct. R. 31(d)(27) and Ariz. Sup. Ct. R. 42, E.R. 5.5(c)(2 and 3) and (d). However, CSAG and its representative, Jennifer Tarr, have admitted that they are not licensed to practice law in Arizona or any other State.

In light of the above, both Claimant's and Respondents' representatives were ordered to submit briefs and authority by September 9, 2016 on the issue of whether or not CSAG and Ms. Tarr's representation of Claimant was authorized. Instead of submitting a brief, CSAG and Ms. Tarr withdrew as Claimant's representative on September 6, 2016 and two days later on September 8, 2016, Hilton M. Wiener, Esq., who is admitted to practice law in the State of New York, filed his Notice of Appearance as Claimant's representative.

Respondents submitted their brief arguing that CSAG and Ms. Tarr were not authorized to represent Claimant, that Claimant's "last-minute" substitution of Mr. Weiner as Claimant's representative was untimely in light of the fact that CSAG and Ms. Tarr had prepared and filed all of the pleadings in support of Claimant's claims and had participated in discovery and this arbitration for over a year. Accordingly, Respondents asked that all of Claimant's causes of action against Respondents be dismissed, which in light of CSAG and Ms. Tarr's violations of Rule 12208(c) and Arizona law, would be appropriate. See, e.g., Sternberger v. Gilleland, No. CV-13-02370-PHX-JAT, 2014 WL 3809064, at *12 (D. Ariz. Aug. 1, 2014) (striking pleading because it was filed by a nonattorney); Villone v. United Parcel Services, Inc., No. CV-09-8213-PCT-LOA, 2009 WL 4824796, at *1 (D. Ariz. Dec. 9, 2009) (holding that if plaintiff, who had been represented by a non-lawyer, wanted to allege a claim, he would "need to sign an amended complaint and represent himself or [he would] be allowed a reasonable opportunity to retain a lawyer, appropriately licensed to practice law in Arizona . . . to file an Amended Complaint or [his] Complaint may be dismissed." (Emphasis added)].

Based on the foregoing, IT IS HEREBY ORDERED that under Rule 12208(c) of the FINRA Code of Arbitration Procedure, as limited by Arizona law, CSAG and Ms. Tarr cannot and could not represent Claimant in this arbitration. See Eazy Bail Bonds, supra, 224 Ariz. at 229-30, ¶¶ 11-15, 229 P.3d at 241-42 (holding that appearance of, and pleadings filed by, non-attorney as party's representative were defective because such constituted prohibited practice of law, resulting in judgment for other party); see also, Shufelt v. Criswell, No. 2 CA-CV 2012-0024, 2012 WL 3044287, at *1, n.1 (App. July 26, 2012) (holding that non-attorney could not represent appellant in an appeal); Tompkins v. Bayview Loan Servicing, L.L.C., No. 1 CA-CV 10-0548, 2011 WL 2739034, at *1 (App. July 14, 2011) (same).

Consideration of CSAG and Ms. Tarr's Prior Submissions
Based on the foregoing authority, the undersigned Arbitrator could dismiss Claimant's ASOC, as Respondents have requested, and the undersigned Arbitrator could refuse to consider any of the Claimant's submissions that CSAG and Ms. Tarr previously filed on his behalf, including any of the facts and arguments set forth therein in making a determination about whether or not Claimant is entitled to an Award against Respondents based on the claims stated in Claimant's ASOC.

Instead of filing a new SOC and FS, as part of Mr. Weiner's Notice of Appearance, he stated that he "adopt[s] all pleadings and submissions previously filed on Claimant's behalf." However, under the above authority, the mere statement that he adopts everything that CSAG filed is insufficient to make those pleadings and submissions qualified for consideration. Either Claimant or his newly designated legal representative had the opportunity to sign and file, but did not, a new SOC and FS, both of which could have more adequately restated Claimant's claims and provided supporting legal authority in contrast to CSAG's deficient pleadings. Moreover, Mr. Weiner's mere "adoption" of CSAG's pleadings is defective in light of the fact that the second FS that he submitted is not a new submission at all because it is dated some six weeks before he filed his notice of appearance in this matter.

Nevertheless, giving Claimant the benefit of the doubt and his "day in court," the undersigned Arbitrator has reviewed Claimant's ASOC and his FS that CSAG and Ms. Tarr filed on his behalf, including the facts, claims, arguments and evidence contained therein, as well as all of Respondents' defenses, arguments and authority and evidence they have submitted. Although FINRA arbitration rules do not provide for explained decisions in simplified arbitrations, such as this arbitration, the undersigned Arbitrator feels that it is important for Claimant to understand why he is not entitled to recover any damages from Respondents under his claims as presented in his ASOC and FS. Based on a review of all of the evidence submitted in this matter by both Claimant and Respondents, the undersigned Arbitrator finds and concludes that Claimant has not sustained his burden of proof on any of his claims.

Don't Set Me Up As A Strawman

Finally, and in anticipation of a slew of mail on the issue, contrary to what some of you might think, I have no problem with involving non-lawyers in the FINRA Arbitration process. If a public customer or industry party prefers to be represented by a non-lawyer, that should be a matter of discretion for each litigant. Much of what passes for a given state's unauthorized practice of law statute is little more than an unseemly effort to use the blunts tools of anti-competitive employment laws to keep out lawyers and others not registered to practice law in a given state and, at the same time, protect the franchise of those who are. On the other hand, when such laws are fairly written and enforced, they do serve a valuable public purpose. 

Some non-lawyer representatives provide a better quality service than some lawyers. Some lawyers that I have litigated against didn't quite seem to be up to the task or, for the matter, fully aware of the issues. On the other hand, that doesn't mean that witnesses need to be subjected to the fumblings and bumblings of an unskilled party representative, and it doesn't mean that our courts and various hearing forums need to patiently school the uninitiated into the vagaries of procedural practices. 

Also READ: 

"Defunct Broker-Dealer Loses No-Show Arbitration With Non-Lawyer" ( Blog, October 13, 2016)