August 25, 2018
According to the customer's allegations and the arbitrator's decision, we have a situation wherein an unnamed financial advisor apparently advised the customer to sell her "Merrill Lynch Investor Choice Annuity." Why did that specific conversation occur? We don't know because the FINRA Arbitration Decision doesn't provide that background. I would have been interested to learn whether Claimant Fluharty had decided to close a Merrill Lynch account, which held her annuity, or whether she needed to raise cash, or whether the Edward Jones advisor recommended the liquidation of the annuity in order to generate proceeds to purchase some house product or other investment. Whatever prompted the Edward Jones advisor's recommendation to sell the annuity, it would appear that the advice did not include a warning that the ensuing sale would trigger a taxable event.
It may be some time coming, but don't underestimate what blockchain technology might do to the securities industry. In our example, a self-validating blockchain allowed one coin exchange to replace all of the brokers, clearing firms, the stock exchange, DTC and the transfer agent that we otherwise would have had to trust with accomplishing our simple stock sale. That's pretty revolutionary, and I think that's just the start.
Chief Executive Officer of the Broker Dealer Exchange John Busacca warns the FINRA member firm community about the ramifications of the recent requirement to designate a Chief Operations Officer (COO). As Busacca notes, most small firms utilize a part time or Rent-a-FINOP to handle their monthly or quarterly FOCUS reports; and, as is often dictated by the economics of small broker-dealer life, those part time FINOPs often act as the firm's CFO or COO. An interesting read for those in the trenches of Small FINRA broker-dealers.
A famous criminal defense lawyer told me about the homicide case he handled in which a gun shot was heard coming from a room that had no windows and only one door. When the police opened the door, they found a victim shot dead and one man sitting in the corner holding a gun. The gunman said "I did it." The police arrested the gunman. The coroner ruled out suicide and the evidence proved that the gunman had fired the shot. At trial, the gunman offered an amazing defense that stunned the courtroom. It was the most incredible story anyone had ever heard and prompted the jury to find "not guilty." Unfortunately, that's all I was told about the case. I don't know what happened in the sealed room. I don't know what the amazing defense was. I was told, however, that the defendant offered an incredible story that won his freedom. Why did I just jerk you around with that infuriating story? Read today's BrokeAndBroker.com Blog.
Whatever the reason, you leave your broker-dealer for another firm. It may be amicable. It may not. According to industry lore as related around the office water cooler, regardless of how warm and fuzzy the parting is, your former employer will launch a multi-pronged offensive aimed at jamming you up, stealing your clients, and having a court issue a TRO against you and your new employer. Setting aside the dubious wisdom dispensed around the water cooler, TROs can, in fact, be devastating -- which is why courts are not so quick to grant them. In today's featured lawsuit, we got a Complaint filed in the Delaware Court of Chancery, and the Plaintiffs are seeking a TRO because they say that they've been libeled and slandered before the Securities and Exchange Commission, and FINRA got roped into the mess, and there's no end in sight for the defamation and it has to be stopped before the trial begins.