Blog by Bill Singer WEEK IN REVIEW

April 22, 2017

You hear about the FINRA regulatory settlement involving the employee who submitted personal charges for reimbursement except he claimed that some mystery man had misused his credit card but then sought reimbursement anyway but later paid all the charges including a first-class-flight ticket even though he testified that he was forced to buy that first-class ticket because a supervisor kept him late and he missed an earlier flight? Strap yourself in for a roller coaster of a regulatory rideREAD Blog publisher Bill Singer, Esq. is a stickler for detail when it comes to disclosures by Wall Street's regulators. Bill is angered when he sees the heavy-hand of a regulator who is dealing with a respondent not represented by a lawyer. It's not that those charged are innocent -- often they are guilty of a violation. Guilt aside, two issues arise when matters are settled by pro se respondents: 1) the sanctions imposed are not always consistent with those imposed against similarly situated respondents represented by lawyers; and 2) the respondent's permanent record does not always contain accurate and fair allegations pertaining to the cited misconduct. A recent FINRA regulatory settlement highlights Bill's concerns. READ 

As Blog readers know, I am a self-professed curmudgeon who rails against the inept and incompetence. I have come to love my role as Wall Street's dyspeptic gadfly. All of which underscores why I was so happy when I recently spotted what I thought was a fellow traveler serving as a Securities and Exchange Commission ("SEC") Administrative Law Judge ("ALJ"). 

While reading In the Matter of Charles L. Hill, Jr. (Initial Decision, Init. Dec. Rel. No. 1123; Admin. Proc. File No. 3-16383 / April 18, 2017), I thoroughly enjoyed SEC ALJ James E. Grimes' caustic, sarcastic, precise, surgical, scathingly blunt, provocative, and erudite prose. Grimes' Initial Decision is a towering example of how a Wall Street regulatory decision should be rendered. Not only does the ALJ present us with a tour de force of content and context, but he builds his impressive wall of a decision brick by convincing brink. All of which is why I urge you to read SEC ALJ James E. Grimes. READ 

High Frequency Trading or HFT is one of those things that folks either love or hate. For detractors, it is a predatory trading tactic/strategy that has ruined the markets; for supporters, it's a legitimate trading tactic/strategy that is simply another step on the road to digitalizing Wall Street. Depending on your perspective, HFT is an oncoming Tsunami that will leave only devastation in its wake; or, in the alternative, it is merely the passing fad and fancy of the day's trading gurus. You are free to see HFT as you will. I have no interest in advocating for either side of the proposition. That being said, I recently came upon a very thoughtful analysis of how best to regulate (or not) HFT: ""High Frequency Trading: Is Regulation the Answer?" (Wake Forest Journal of Business and Intellectual Property Law, Volume 17, Number 2, Winter 2017 by Lazaro I. Vazquez). READ 

Under consideration in today's Blog is what some may view as a case of "no good deed goes unpunished" or "the road to Hell is paved with good intentions." On the other hand, some readers may be less charitable and have concerns about what may strike them as an inappropriate relationship between an advisor and one of his clients. As with many things in life, different folks will likely have different opinions about the same set of facts. The important exercise in this regulatory settlement is for industry participants to spot the compliance and regulatory lapses and to come away with some ideas as to how to avoid such problems.  If nothing else, advisors should carefully consider the merits of their accepting Powers of Attorney or acting as Health Surrogates for clients who are in nursing homes. READ 

Citigroup, Its Former Employee, A Breached Contract, Six Blind Men, One Elephant, And FINRA Arbitrat

Today's Blog discusses a seemingly important FINRA Arbitration Decision in which Claimant Citigroup sought to recover about $270,000 in damages as a result of a former 
employee's alleged breach of contract. By a vote of 2:1, the arbitrators award nearly the full amount of what Citigroup sought but surprisingly off-set that amount by a hefty award to the former employee.

If you are an industry employee, you should be fascinating and intrigued by that outcome and certainly interested in learning what had happened and why the arbitrators ruled as they did. If you are FINRA, however, you seem to think it's best to present what's pretty much a blank document in a pitch-black room. Why does FINRA persist in this counter-productive pattern of conduct? READ