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Being a day late and a dollar short happens. Be that as it may, those are not exactly words to live by. In a recent FINRA arbitration, a former Oppenheimer & Co. employee is representing himself against his former firm's demands for repayment of compensation. Rule #1 for handling your own lawsuit is always be on time -- and, of course, show up in court or arbitration with clean underwear. Those first impressions are very important. In today's featured arbitration, the Respondent didn't start off on the right foot.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in September 2017, Claimant Oppenheimer & Co. asserted unjust enrichment in connection with monies purportedly owed to the firm by its former employee Respondent Marchitto pursuant to a 2016 Incentive Compensation Grid Rate Stabilization Agreement. Claimant Oppenheimer sought $14,284.85 for an alleged over-payment of a management fee plus interest and at least $1,500 in costs in connection with the arbitration and collection. In the Matter of the FINRA Arbitration Between Oppenheimer & Co., Inc., Claimant, vs. Jeffrey Louis Marchitto, Respondent (FINRA Arbitration 17-02399, February 8, 2018).
Late and Deficient and Declined
Although Respondent Marchitto's Answer was due on October 31, 2017, he did not file it until January 16, 2018. In apparent response to Claimant's assertions that the Answer was deficient, Respondent Marchitto filed another such pleading on January 19, 2018. As to that second Answer, Claimant Oppenheimer requested the redaction of certain confidential client information. After receiving the various Answers and replies thereto, the sole FINRA Arbitrator "determined that Respondent's Answer is untimely and does not address the reason for his failure to respond in a timely manner." On January 31, 2018, Respondent filed yet another Statement of Answer in response to Claimant's January 22, 2018 redaction request, but the FINRA Arbitrator declined to accept this third iteration of an Answer. The FINRA Arbitration Decision asserts that Marchitto represented himself in a pro se capacity.
The FINRA Arbitrator found Respondent Marchitto liable and ordered him to pay to Claimant Oppenheimer $14,284.85 in compensatory damages plus 9% interest from the December 7, 2016, date of his resignation until paid in full. The Arbitrator also required Respondent to reimburse Claimant for its $1,050 FINRA filing fee.
In issuing her Award, the FINRA Arbitrator offered a thoughtful rationale, which, in part, states:
Claimant filed a Statement of Claim alleging damages against Respondent. Respondent was hired as a registered representative sometime in September 2005 and voluntarily resigned on December 7, 2016.
Claimant offered a stabilization program, which is a voluntary agreement with its advisors. Respondent voluntarily entered into the Agreement, which the Branch Manager signed on or about January 28, 2016. The executed Agreement was attached to the Statement of Claim and was reviewed by the Arbitrator. A review of the Agreement demonstrates that Respondent's 2016 Grid-Eligible Revenue business was stabilized at a payout rate of 41%. Further, Respondent was required to achieve Grid Advance Gross Revenue of $275,000.00 or more.
When Respondent resigned on December 7, 2016, he had not achieved the required Grid Advance Gross Revenue and his commissions generated did not equal the production level at which he had been compensated. The Arbitrator also reviewed the exhibits named Compensation Trends, and Stabilization Review. The overpayment amounted to $12,561.00.
In addition, while employed with Claimant, Respondent was entitled to quarterly managed fee payments. These fees are paid in advance, but in order to receive the full payment, Respondent was required to be employed for the entire quarter. Since Respondent resigned on December 7, 2016, he was paid for fees he had not earned. Respondent was paid additional compensation directly attributable to the quarterly managed fee payments in the amount of $2,907.91. . .
Bill Singer's Comment
Online FINRA BrokerCheck records as of February 14, 2018, disclose that Marchitto was first registered in 2001 with Morgan Stanley, and joined Oppenheimer & Co., Inc. in September 2005, where he remained for over 11 years.
The sole FINRA Arbitrator did an excellent job walking us through the pertinent documents, dates, and payments. The Stabilization Agreement at issue was entered into on January 28, 2016, during Marchitto's last year with the firm. As delineated by the Arbitrator, Marchitto was to be paid at 41% subject to at least $275,000 in gross revenue, which he had not reached as of his December 7, 2016, resignation. Similarly, he had not served out an entire quarter when he resigned and, as such, the firm asserted that he was not entitled to retain the last paid-out quarterly managed fee.
FINRA arbitrators tend to be somewhat flexible with pro se parties, be they public customers or associated persons. On the other hand, inherent in the arbitrators' willingness to often bend over backwards for unrepresented parties is an expectation that the recipients of such discretion will be punctual and make a good-faith effort to comply with what may often seem as technical, legal requirements. Inferring from the FINRA Arbitrator's comments in the Decision, Marchitto may have pushed the envelope in terms of what was expected from a pro se party. Whatever Marchitto's defenses and/or explanations may have been, he did himself no service by filing a 2 1/2 month late Answer and a deficient one at that.