Customer Chat with Schwab Chat Representative Prompts FINRA Arbitration

August 7, 2019

Charles Schwab & Co., Inc. apparently employs "Chat Representatives." That's nice. I like to chat. Frankly, most lawyers like me who charge hundreds of dollars an hour love to chat provided we're on the clock. In any event, after some 37 years on Wall Street, I don't actually know what a Chat Representative is or does. I looked up all the official categories of representatives on FINRA's website and, go figure, there's nothing for a Chat Representative and there isn't even an examination that you can take to become one. In any event, apparently a Schwab customer had a not-so-lovely chat with one of the brokerage firm's Chat Representatives because the customer sued claiming that the chatting rep had failed to place a sell order.

Case In Point

In a FINRA Arbitration Statement of Claim filed in December 2018 and as amended, public customer Claimant Fernandez representing himself pro se sought $11,910 in monetary losses; $13,000 in punitive damages; $425 in reimbursed filing fees; and $120 in interest in connection with his intent to exercise Micron Technology, Inc. options. In the Matter of the Arbitration Between Stephan Fernandez, Claimant, v. Charles Schwab & Co., Inc.,Respondent (FINRA Arbitration Decision 18-04437) As set forth in part in the FINRA Arbitration Decision:

In the Statement of Claim, Claimant alleged that Respondent's chat representative, unnamed party Joel Richard Summerville ("Summerville"), failed to execute or assist with a sell order; and that Respondent exhibited poor conduct by ignoring material information involving the interaction and refused to accept responsibility for its failure to execute a sell order as part of a same-day substitution.1 In Claimant's Amended Statement of Claim, he alleged that Summerville failed to place or acknowledge a sell order, and that Respondent exhibited poor conduct by failing to abide by the operational and trading processes entitled to other clients; facilitated a biased trade dispute review; and suppressed factual information and willfully ignored factual and material information. 

= = = = =

Footnote 1: Offsetting changes in a margin account during the day that result in no overall change in the balance of the account. 

Respondent Schwab generally denied the allegations. Non-party Summerville requested the expungement of the matter from his Central Registration Depository record ("CRD")


The sole FINRA Arbitrator found Respondent Schwab liable to and ordered it to pay to Claimant Fernandez $5,955 in compensatory damages; $120 in interest; and $212.50 in reimbursement of one-half of the filing fee. The Arbitrator denied Summerville's requested expungement.

Bill Singer's Comment

As further explained in FINRA's online BrokerCheck report, Fernandez alleged:

[f]ailure to follow instructions provided on 9/20/2018 via a chat channel to exercise 30 call options and sell the resulting 3,000 shares to close the position.

A tad lost in the FINRA Arbitration Decision is the lurid (and troubling) allegation by the customer Fernandez that Schwab had "facilitated a biased trade dispute review; and suppressed factual information and willfully ignored factual and material information." Biased trade review. Suppressed factual information. Willfully ignore factual and material information. Perhaps the arbitrator should have referred this matter to FINRA for a regulatory investigation? 

In the '60s, we didn't so much "chat" as we "rapped" -- and for those of you old enough to remember, we had rap sessions. Just a thought -- just a free suggestion -- but maybe Schwab would like to relaunch its Chat Representative program under the new name of Rap Rep? If you ask me, my new name has a vintage, retro, throw-back thing working for it. Can you dig where I'm coming from, man? Hey, let's phone the groovy cats over at Schwab and get one of their Rap Reps on the phone and see if we can put our bread to work. Maybe they can put us into one of those weed stocks -- oh, sorry, you're right, the kids today call it cannabis. Far out! Peace!! Groovy!!!