Blog by Bill Singer ESQ WEEK IN REVIEW

March 3, 2018
It's a story as old as elementary school. They give a test. Most of us take the test. Some folks cheat and bring notes that they have cleverly hidden. Then there are those who claim that they couldn't show up to take the test because they were home sick with bubitotious infectosis. No, I didn't make that up. It's a real illness. You get it from eating cooked sushi. Well . . . okay, maybe I made that up but, you know, so what. It sounded real, right? I'm not saying that I ever claimed to have come down with bubitotious infectosis when a math test was scheduled but, on the other hand, I wouldn't believe anything that I say, so, who knows. Anyway, in today's Blog we feature the story of a guy who didn't show up to take the same registration exam several times but figured that he could cross his fingers behind his back and pretend that he had taken the test and passed. Given that we're discussing a FINRA disciplinary settlement, you sort of figured out that all those machinations didn't work out. READ

( Blog)
Readers of the Blog know that our publisher, Bill Singer, Esq., is a critic of mandatory arbitration before the Financial Industry Regulatory Authority, whether the coerced litigants are public customers or industry participants. As such, readers might expect to find these words in a article penned by Bill:

This Arbitration Award is a blight on FINRA Arbitration proceedings. The Award that was obtained by the Respondents was procured by fraud and deceit when the Arbitrators turned a blind eye to needs of the individuals, the elderly public investors, that FINRA is charged with protecting. The relief that is requested is extraordinary but so are the facts of this case.

The thing about expectations is that they don't always turn out to be correct. Those acerbic words above did not flow from Bill's poison pen but from lawyers representing aggrieved public customers. You better sit down before your read today's blog. You're in for quite a trip. READ

"Outside Business Activities FINRA Requests Comment on Proposed New Rule Governing Outside Business Activities and Private Securities Transactions" (FINRA Regulatory Notice 18-08, February 26, 2018). Read the Blog's analysis of the rule and Bill Singer, Esq's comment ( Blog).
As set forth int he OBA Notice's "Summary":

FINRA seeks comment on a proposed new rule to address the outside business activities of registered persons. The proposal is the result of FINRA's recent retrospective review of FINRA's rules governing outside business activities and private securities transactions, FINRA Rule 3270 (Outside Business Activities of Registered Persons) and FINRA Rule 3280 (Private Securities Transactions of an Associated Person), respectively. The proposed rule would replace FINRA Rules 3270 and 3280 and is intended to reduce unnecessary burdens while strengthening investor protections relating to outside activities. 

Broker Dealer Wins Indemnification Arbitration Against Stockbroker ( Blog)
Buried somewhere among the bundle of papers that you never really read when you joined your current firm is likely an Indemnification Agreement. I'm not going to attempt to explain all the variations that exist among such undertakings but suffice it to say that should your employer incur costs in defending you against lawsuits or reimburses a client for losses, you may get a demand to  indemnify your employer.  In today's Blog, we present a recent FINRA arbitration in which member FINRA firm Kovack Securities comes after a former employee for indemnification arising out of a settled customer arbitration. It's an unusual lawsuit because most of these matters either get resolved prior to the need for the employer to sue the employee, or the employer firm simply eats the charges as a cost of doing business. Whatever the circumstances between Kovack Securities and its employer, nothing got worked out between the employer and employee, and, alas, we wind up with a lawsuit and an arbitration hearing. READ

Wells Fargo Sustains Stunning Promissory Note Loss ( Blog)
To those unfamiliar with Wall Street litigation, today's featured FINRA arbitration and court order may seem unimportant. The dispute at issue is a garden variety promissory note lawsuit pitting a former employee against Wells Fargo Advisors and yet again involving an allegation of an unpaid balance due on the employee forgivable loan. In more dry terms, we seem to have yet another EFL case. For those more familiar with Wall Street's litigation docket, we have a very important case that highlights a dramatic attempt by one of FINRA's large member firms to gain an advantage over an employee and to then to further exploit that leverage via a costly lawsuit. Moreover, today's arbitration warns future industry employees to pay very, very careful attention to whether their settlements or lawsuits against their former employers deem the unpaid EFL balances to constitute the cancellation of a debt or unpaid income. READ