Blog by Bill Singer WEEK IN REVIEW

August 5, 2017

2Cir Affirms Icahn Victory In Options Disgorgement Case

In dismissing Olagues's appeal, 2Cir concedes that Rule 16b-6(d) requires an insider to disgorge the entire premium received for writing an option, which would cover the disgorgement of the actual amount paid to Icahn for the sold Puts. Appellant argued that the "disgorgement" should further include not merely the 1 cent short-swing profit on the Put sales but also any so-called "discount" received by the Icahn entities when they purchased Call options. READ

Opening Pandora's Box Of Puts
A customer alleges that he lost money when the broker-dealer invested his funds without his authorization. As far as lawsuits go, that's a pretty strong case. The thing about strong cases is that they can inexplicably go off the tracks. The customer Claimant swears on a stack of bibles that he never authorized the trades and the stockbroker swears that he did. Which of the swearing witnesses a panel of arbitrators chooses to believe makes all the difference. Another oddball aspect of trying a case is that even if you prove that there was a foul, you may not be able to prove that there was harm -- or the arbitrators may view your harm as so minor that they tell you to walk it off and keep the game going. 

On Wall Street, public customers are forced to pursue their grievances through a system of mandatory arbitration at the Financial Industry Regulatory Authority. One of the glaring shortcomings of FINRA mandatory arbitration is that the decisions issued by arbitrators aren't always helpful, useful, or comprehensible. It's as if there's a secret understanding to say nothing of consequence or, okay, let's keep it to the bare minimum. All of which reminds Blog publisher Bill Singer, Esq. of a soccer match between the great philosophers of Ancient Greece and those of Germany. Sure,  everyone is giving everything a lot of thought but nothing much happens. In the end, a goal is scored but we don't quite understand why. READ

Chia Hair Plugs And 100% Principal Protected Lehman Brothers Notes

The men and women on Wall Street who pitch investments to public customers often believe what they are saying. They've been forced to attend a dog-and-pony show (very adorable dog and what's not to like about most ponies?) where some investment genius pointed to PowerPoint slides and extolled the virtues of the featured product. By the time the stockbrokers left the meeting, they were true believers. Unfortunately, what they were told didn't turn out to be true. What could never, ever go wrong, did. When the customers wound up covered in red ink, they sued -- and, wouldn't you just know it, pointed the finger of blame at the stockbrokers. Frankly, in many cases (but not all), the stockbrokers were victimized by their brokerage firm and its research department and presenters with the dog and pony, all of whom swore that the investment would stand the test of time. Except when the Great Recession hit Wall Street like a tsunami, those so-called time-tested assumptions drowned under a flood of unexpected complications. READ

Tullet Prebon Wins Blackballing Arbitration

In a recent FINRA intra-industry arbitration, we get to see the unraveling of a particularly ugly mess of an employment dispute pitting]a member firm against a former employee and his new shop. Among the more colorful allegations is that the former firm engaged in "blackballing" its former employee. READ

GUEST BLOG: "Whistleblown" by Michael Schwartz

I did not wake up one day and decide that this is the day I was going to commit career and financial suicide.  I was just doing what I was trained to do.  Then, and I'll give you the Cliffs Notes version: shit hit the fan.  How many of the financial industry scandals and multi-million, and billion, dollar fines could have been addressed from the get had someone acted appropriately when someone (i.e. a whistleblower) raised their hand to flag an impropriety?

In my case I made sure to follow all the proper protocols, to the extent that I put myself in harm's way so that nobody could say I didn't give Barclays the chance to do the right thing. A Form TCR Whistleblower referral was filed with the Securities and Exchange Commission. Regulators on both sides of the Atlantic have spent considerable time with me in investigating these and related issues. Most investigations remain open and active as far as I am aware, but no action has been taken against Barclays thus far.  I don't infer anything by the status of matters either way. Like those from Wells Fargo whose referrals to the Department of Labor's OSHA for whistleblower retaliation were never investigated, I too experienced its apathetic approach to investigating retaliation claims.  This isn't about establishing my whistleblower bona fides, however, and Barclays is a very different place these days.  My former business unit doesn't even exist at Barclays any longer, and none of the parties involved (at least directly) are employed there any longer. READ

FINRA Gets One Last Slap In Marine Veteran's Face

Today's article is the Blog's final update of its coverage of the plight of Richard S. Botkin, a 15-year Marine Corps veteran and a registered representative since 1986. 

Notwithstanding the dedicated efforts of a grassroots coalition spearheaded by Stephen Kohn, candidate for election as FINRA's 2017 Small Firm Governor, the Financial Industry Regulatory Authority has rejected appeals to reconsider the size of the fine and the length of the suspension imposed upon Respondent Botkin, who is serving a four-month suspension and liable for a $15,000 fine. Do those sanctions fall within FINRA's "Sanction Guidelines"? Yes. Should Botkin have been fined and suspended for his alleged violation of the self-regulator's Private Securities Transaction Rule? There is precedent for the imposition of those dual sanctions. The issue presented with Botkin's regulatory settlement, however, is not whether a fine and suspension were warranted but whether the size of the $15,000 fine and the length of the four-month suspension were in the public interest. READ