Blog by Bill Singer Esq WEEK IN REVIEW

May 11, 2019
Wall Street regulates the so-called Outside Business Activities ("OBA") and Private Securities Transactions ("PST") of its associated persons/registered representatives. Some say it's necessary and appropriate regulation. Others say its overly intrusive and unfair. Regardless of where you stand on OBAs and PSTs, FINRA member firms have in-house compliance policies and the self-regulator routinely enforces its rules. In a recent FINRA Acceptance, Waiver and Consent regulatory settlement, we come across one unfortunate fellow who allegedly engaged in five OBAs and two PSTs without providing the requisite prior written notice to Merrill Lynch. It doesn't end well for him.
Inevitably blockchain miners will merge and consolidate in order to stay profitable; which means that the blockchain will have fewer, larger mining operations. What was meant to be a new, decentralized form of money lacking systemically important institutions has become a system completely controlled by just a handful of people. Inevitably, concentration leads to dominance, and dominance leads to oligopolistic and monopolistic practices. What was envisioned as too big to fail may just become too big and a failure.
You post an ad to sell your used car. I answer the ad. We agree on a price -- let's say $3,500. I pay you the funds. You deliver the title to me. I drive the car away. The next day, you see an ad posted by me asking $7,000 for the same car that you just sold to me. For whatever reason, you feel cheated. I didn't put a gun to your head. You were happy with the cash that you got for your clunker. I have incurred all the risk of flipping the car that I just paid for. Still, you feel cheated and angry. Now, imagine that instead of the sale of a used car, we got two guys who engineered the sale of an investment firm, and the seller gets wind of the buyer's plan to flip the biz. Read today's blog to see how that case made its way through a FINRA arbitration.
Imagine that a former employee has been saying nasty things about your brokerage firm. In response, you file an arbitration complaint to enjoin that individual from making further statements that slander, libel, or otherwise defame your firm. When the former employee doesn't file an Answer and doesn't show up for the hearings, maybe you ask the arbitrators to take things a bit further. Maybe you ask for a permanent injunction to prohibit the former employee from making comments that disparage, criticize or otherwise reflect adversely upon the firm. Maybe the arbitrators hear your arguments, hear none from the absent former employee, and, hell, they give you what you asked for. That seems fair. Except, you know, should a FINRA Arbitration Panel restrain mere criticism? Should arbitrators restrain mere adverse comments?
Oh the games people play. Oh the game regulators play. Oh the games FINRA plays. In today's blog, we consider the plight of a FINRA member firm and its seemingly all-in-one executive known but to FINRA -- well, sort of. But for the self-regulator's silliness in hiding the apparent malefactor's name, the regulatory settlement is a useful exercise in how to better supervise employee trading and to implement watch and restricted lists.