Blog by Bill Singer WEEK IN REVIEW

September 2, 2017

Walter Becker, Steely Dan
Thanks for the Music

UPDATE: Merrill Lynch FINOP Cited By SEC For Unprecedented Violations

Pursuant to the terms of the settlement, the SEC revised its allegations from asserting that Tirrell had "knowingly reduced" the reserves to his having "caused" the firm to do same. Further, the SEC revised its earlier allegations that Tirrell knew that regulators had "significant unanswered questions about changes being made" to his "failing to respond to questions." Moreover, the SEC revised its initial allegations that Tirrell had "failed to accurately disclose the purpose of the Trades to regulators and repeatedly ignored [their] requests" to he "should have known the purpose of the trades was to finance firm inventory and should have conveyed that purpose to regulators." Finally, the allegations that Tirrell's conduct was reckless and negligent in aiding and abetting and causing the firm's violations was revised to an allegation that he was negligent. READ

PNC Loses Wrongful Termination FINRA Arbitration

Today's Blog features an intra-industry employment dispute involving allegations of defamation, libel,slander, and wrongful termination. The former employee took exception with his former employer's characterization that he had been terminated because of his inappropriate behavior. In stark contrast to the employer's allegation, the employee argued that he was retaliated against after complaining about sexual harassment. There are lots of aspects of this FINRA arbitration that should catch the eye of both lawyers and industry participants. For one thing, it took over five years from the date of termination until the rendering of the FINRA Arbitration Decision. For another thing, the employer has a history of former-employee lawsuits alleging similar claims of improper disclosures. READ

FINRA Arbitrators Rewrite Wells Fargo Termination Language

It is a lonely life that the Blog's publisher Bill Singer, Esq. leads. Day in and day out he reads whatever gets posted on the various website press pages of the FBI, the Department of Justice, the SEC, FINRA, NASAA, and several other court and regulatory organizations. At times, it's a flood of filed complaints, motions, orders, decisions, and opinions. Other times, it's little more than the electronic drivel of the Internet Age.

The other day, the Financial Industry Regulatory Authority posted an arbitration decision. The underlying case involved the expungement request of a former Wells Fargo employee. She represented herself. Wells Fargo opposed her requested relief. Three FINRA arbitrators heard the case and issued their Decision, which took away Bill's breath. It brought tears of joy to his eyes. It was so stunning and so beautiful a bit of presentation and explanation that Bill drafted this article. And then it gave Bill pause. What if this was the future of things to come? What if FINRA had finally grasped the concept of including sufficient content and context in its published decisions? What if nothing issued by FINRA warranted a criticism or critique? Omigod . . . what would Bill do if there was nothing left for him to grouse about? 

And then, Bill calmed down. There would always be something for him to complain about. Life was, indeed, good. The Universe had been restored to equilibrium. Of course, don't get too complacent because we should all be worrying about those recent news stories concerning radio waves emanating from deep, dark, unknown space. When they finally decipher those messages, Bill will be ready to criticize and critique the aliens' lack of content and context. The battle goes on. The fight will continue! READ

SEC Case Against S&P Duka Fizzles Out

In the late 1990s, Barbara Duka began employment at Standard & Poor's Ratings Services ("S&P") as an analyst, and by 2008, she had risen to Manager of the Commercial Mortgage-Backed Securities ("CMBS") New Issuance  ratings group, where her primary responsibilities included managing the rating process, identifying changes to the criteria used to rate CMBS transactions, and managing development of the model used to rate transactions. With the onset of the Great Recession in 2008 and 2009, employees were shifted from the New Issuance group to Surveillance and by 2009, only five or six people reported to Duka. Around early 2011, Duka purportedly had responsibility for the surveillance ratings of CMBS. 

What follows is an often harrowing tale of a world, as Duka and others knew it, coming to an end. The mortgage business had cratered. The economy was on the brink. The Great Recession was in full bloom. Fingers were being pointed, and many of them were wagged at ratings agencies, most notably S&P. How the hell could you have rated this toxic crap as anything other than deadly? And in asking such questions, the glare fell upon those in the front-lines of compliance and those who were charged with issuing what everyone thought was supposed to be unbiased research and ratings. Someone had to pay!  For some, what happened was a witch hunt. For others, it was a long overdue day of reckoning. Wherever you come down on that spectrum, the Barbara Dukas of Wall Street had concentric circles on their backs. READ

Turning Right Is Wrong At FINRA Red Light

You're driving on the street and come to a red light. What do you need to do to make a legal right turn? Your answer is that you need to come to a full stop at the red light, carefully check out the traffic, and slowly make the turn, right? Great answer. Except that I didn't tell you that the red light is in Manhattan in New York City. Unless there was a sign stating that you can make a right turn on the red light, it's illegal to make a right turn on red in NYC. Oddly, turning right on red is likely legal everywhere in the United States except in New York City.

What's your excuse to the cop asking to see your license? I'm from out of town, officer, and didn't know that I can't turn right at the red light. I can legally turn at a red light back home. I did come to a full stop. I did check to make sure that there was no traffic in the street into which I turned. Sorry. I won't do it again.

In contrast to your explanation, we got another driver from out of town who didn't come to a full stop, didn't look when he turned right, and wound up with a fender bender. Then we also got the driver from NYC who knew about the no-turn law but she did it anyway. Should all the above drivers have their licenses suspended and fined? Should the police exercise some discretion or does the law suffer when not applied consistently?

Wall Street is in Manhattan and you can not make a right turn there at a red light. Blog publisher Bill Singer, Esq. points out, the rules of the road on the Street aren't always clear and sometimes folks think that what they're doing is legal and okay. What happens to registered reps in the biz when it turns out that they turned right at a FINRA red light? Read today's article for an interesting case. READ

Weight Management Company Weighs Heavily On Stockbroker's Career

Another day and another violation of the Financial Industry Regulatory Authority's Private Securities Transactions Rule. In today's Blog, we consider the missteps of a registered rep who raised $50,000 for a weight-loss biz, and, as a result, this stockbroker literally took a pounding. Also worthy of notice is FINRA's bespoke sanction of restitution to the investor, who apparently wasn't all that happy with her investment. READ

FINRA Calls PST Then OBA Then PST. Omaha! Omaha!! Omaha!!!

In a recent Financial Industry Regulatory Authority ("FINRA") regulatory settlement, a stockbroker was barred from the industry as a result of allegedly failing to properly notify his employer and obtain its approval for soliciting firm customers to invest in his own company. As Blog's publisher Bill Singer, Esq. notes, the published settlement is a bit perplexing because it seems to be start off as an Outside Business Activity violation but winds up as a Private Securities Transaction violation. With the football season nearly upon us, let's just say we got a bit of a regulatory misdirection play going on here. READ