September 21, 2019
In a recent FINRA arbitration, an unhappy Citigroup customer was seeking between $1 million and $5 million in damages as a result of losses he sustained via investing in a variety of cryptocurrencies. Except the customer wasn't complaining about trades done at Citigroup -- no, the customer accused the brokerage firm of negligence, breach of fiduciary duty, failure to supervise, and selling away. As best we can figure out from the tidbits of facts in the FINRA Arbitration Decision, the customer was referred by his stockbroker to an outside lawyer, who, in turn, referred the customer to a purported crypto investment genius. The crypto trades didn't go well for the customer but it didn't seem that the stockbroker had entered a single order. All of which prompted the stockbroker to try and clear his name via an expungement hearing. In the end, what did and didn't happen is far more complex and nuanced than the case set out in the FINRA Arbitration Decision.
To trade securities (or anything else) you need two things. You need information and you need a market. You can't decide on a trading price or strategy without knowing something about the thing you want to trade. Only after you've made a trading decision do you need the machinery of a market to make it happen. More than a difference between East and West or the uncertain political future of Hong Kong, last week's short dialogue between the HKEX and the LSE was a debate whether, in the future, information will be more valuable than infrastructure.
For those of you playing the at-home version of "Lawsuit," the $500 question is how do you think the federal court ruled when its Order begins with this observation: "In a brief essentially devoid of any legal analysis or citations, Plaintiff's counsel claims the parties' arbitration agreement is inapplicable or void."
They say you have to break some eggs to make an omelet (or, if you prefer, omelette). Similarly, you have to break some eggs in order to get egg on your face. A few years ago, it appears that the Financial Industry Regulatory Authority was attempting to make an omelet in 2016 and 2017 when it appointed Stephen M. Cutler, then Vice Chairman of JPMorgan Chase & Co., to its Board of Governors. Based upon revelations in a just-released 2019 FINRA regulatory settlement with JPM Securities LLC, FINRA didn't manage to flip the omelet and wound up with a face covered in dripping egg. I'm sort of enjoying watching the self-regulatory-organization try to maintain its composure while cleaning itself up. Can I get a toasted bagel and a refill of my coffee while I'm waiting?
In a recent FINRA expungement arbitration, the associated person Claimant throws the ball to the arbitration panel, which drops the ball, so the Claimant runs to the former employer Respondent, who picks up the ball and throws it to What. What throws it to I Don't Know. I Don't Know throws it back to Tomorrow -- a triple play.