October 27, 2018
Few things are more frustrating for Wall Street's customers than to believe that they were victimized by one of the industry's large broker-dealers and then find out that their disputes must be adjudicated via mandatory arbitration before the Financial Industry Regulatory Authority ("FINRA"). For many investors the whole mandatory arbitration route comes as a surprise. Yes, as it turns out, there was a mandatory arbitration clause buried among many, many papers that were part of the new account onboarding package. Remember all those yellow-arrow-stickies indicating sign here, and here, and here, and here too, oh, and don't forget here too? Yup, you sorta signed away your right to sue in a court. Making matters worse, it turns out that the mandatory arbitration is going to be conducted by FINRA, which, after you do some belated online research, looks less like an independent industry regulator and more like a glorified trade group controlled by its large broker-dealers. All of which brings us to a recent lawsuit in which one angry UBS Financial Services customer was not prepared to go with the flow. Her lawyer truly came up with some clever and persuasive legal arguments against enforcing the mandatory arbitration agreement. The thing with clever and persuasive legal arguments is that they don't always result in the desired verdict.
Sears filed for bankruptcy protection last week, something long coming. Some have pegged the start of Sears's decline to its diversion of retail cash flow to non-core businesses when it acquired Dean Witter Reynolds Securities in 1981. One author blames Sears's demise on the Faustian bargain it made with hedge fund billionaire Edward Lampert in 2004. I think those are excuses wide of the real mark.
If you have ever interacted with FINRA, whether that be in a disciplinary action, an expungement matter, or up against them in court, then this article will not shock you. You have certainly experienced the frustrations that come along with the vague rules that are ever-changing and seem as though they must be designed simply to make everyone's lives that are affected by them just a tad more complicated. The latest and greatest in arbitrary FINRA practices is the denial of Dispute Resolution Forum to brokers requesting expungement of customer dispute occurrences that arose from a prior arbitration that resulted in an award/judgment.
In today's featured FINRA arbitration, we got a widow. We got her deceased husband's two stockbroker brothers. We got about five brokerage accounts that have to be dealt with after the husband's death. We seem to have some bad feelings between at least one brother-in-law and the widow. All of which sets the stage for a delay in transferring some accounts. One question is whether said delay caused losses. The other question is whether the delay was more than an inconvenience and, perhaps, crossed over the line into a regulatory violation or worse.
Ameritas Stockbroker Wins Snowball In Hell Expungement (BrokeAndBroker.com Blog)
What chance would you give a registered representative to win an expungement of a customer complaint that was filed in 2009 seeking $350,000 and was settled in 2012 for $85,000? About as much of a chance as a snowball in Hell, right? You know -- every so often, and I'm not saying with any regularity, but every so often, a very, very magical, perhaps even mystical, snowball is created from a super amalgam of ice crystals and that round frozen sphere doesn't so much as sweat when tossed into the pits of Hell.