FINRA Arbitrators Say Who Is On First. I Don't Care. I Don't Give A Darn

September 16, 2019

In a recent FINRA expungement arbitration, the associated person Claimant throws the ball to the arbitrator on first, who drops the ball, so the Claimant runs to the former employer, 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.

Case In Point

In a FINRA Arbitration Statement of Claim filed by associated person Claimant Chiarito in June 2018, she asserted defamation, negligence, and violation of FINRA Rule 2010. In the Matter of the Arbitration Between Carol Jean Chiarito, Claimant, v. Mutual Of Omaha Investor Services, Inc., Respondent (FINRA Arbitration Decision 18-02220)

The FINRA Arbitration Decision asserts that:

The causes of action relate to Claimant's allegation that Respondent filed an inaccurate and defamatory Form U5. 

In addition to compensatory damages, Claimant Chiarito sought:

2. Expungement of Claimant's Form U5 (and the accompanying Disclosure Reporting Page in its entirety), or, in the alternative, a substitution of alternate language to be provided by Claimant at the hearing; 

3. A directive to expunge the customer complaint pursuant to FINRA Rule 2080 . . . 

Respondent FINRA member firm Mutual of Omaha Investor Services generally denied the allegations and asserted various affirmative defenses.

SIDE BAR: Just by way of a brief recap, Claimant Chiarito filed a FINRA Arbitration over an allegedly inaccurate and defamatory Form U5. What was it about the U5 that she was upset? As best we can tell, it had something to do with the characterization by Mutual of Omaha of a customer complaint on her Form U5. 


In April 2019, the parties settled the matter and filed a Joint Motion for Entry of a Stipulate Award. Generally, Stipulated Awards are perfunctorily entered on the record by most FINRA Arbitration Panels. Not this Stip. Not by this Panel. Why? The FINRA Arbitration Decision offers this explanation:

[B]y Order dated May 30, 2019, the Panel denied the Joint Motion without prejudice and stated that the parties may resubmit the Joint Motion, along with the proposed Award, for the Panel's consideration at the conclusion of the expungement hearing.  

On June 3, 2019, Claimant submitted a letter formally withdrawing the request for expungement of the customer complaint pursuant to FINRA Rule 2080. 

On June 6, 2019, the parties submitted a stipulated request to FINRA to set a prehearing conference to address the Joint Motion By Order dated June 7, 2019, the Panel requested that the parties provide copies of Claimant's BrokerCheck Report, Individual [CRD] Snapshot, Forms U4 and U5 that contain the language that Claimant wished to expunged, and any documents concerning settlement or other disposition of the claims asserted by Claimant. 

Ummm . . . what?

On May 30, 2019, the Panel denied the motion to enter the stip. Who the hell denies a stip? And assuming the arbitrators denied the parties' stip, that sort of begs the question: Why? Okay, sure, the arbitrators offered to allow the motion to be resubmitted. Why didn't they just defer their adjudication on the motion until the conclusion of the hearings? I dunno. I'm just readin' along with the rest of youse guys. In any event, just a few days after the Panel says "no" to the stip, on June 3, 2019, before the expungement hearing commenced, Claimant Chiarito withdrew her request for the expungement of the customer complaint. What started this FINRA Arbitration? If y'all remember, way back in June 2018, Claimant Chiarito filed a FINRA Arbitration Statement of Claim for the ostensible purpose of winning the expungement of:

1. a customer complaint from her industry record; and 
2. her Form U5 or, in the alternative, the revision of same.

So, as of June 3rd, when Claimant withdrew her request to expunge the customer complaint, that seems to have knocked out item #1 above. Which leaves us moving forward with Claimant's expungement hearing for the purpose of . . .  of what exactly?  Well, that only leaves #2 above, which is the cleaning up Chiarito's Form U5. Except, not to be too snarky here but, cleaning it up about what? Keep in mind that Claimant withdrew her requested expungement of the customer complaint. What is it that needs to be addressed by the Panel?

Abbott: You throw the ball to first base.

Costello: Then who gets it?

Abbott: Naturally.

Costello: Naturally.

Abbott: Now you've got it.

Costello: I throw the ball to Naturally.

Abbott: You don't! You throw it to Who!

Costello: Naturally.

A Misunderstanding

On July 19, 2019, the Panel held a telephonic pre-hearing conference, at which time the parties and arbitrators discussed the resubmitted Joint Motion, which the Panel ultimately granted and entered. Why? I dunno. Based upon what? I don't care. About all we are told is that the Panel recommended the expungement of the Form U5 "Termination Explanation" filed by Respondent Mutual of Omaha and the following revision with various conforming changes through the form:

Terminated for a misunderstanding of the policies and procedures regarding disclosed outside business activities. 

Bill Singer's Comment

Outside Business Activities ("OBA")? OBA?? Where the hell did this OBA thing come from? Is it related to the underlying customer complaint or something completely different?  Was there even a customer complaint about the cited OBA? Frankly, the FINRA Arbitration Decision is little more than a lot of misdirection.

Online FINRA BrokerCheck records as of September 16, 2019, disclose that Chiarito was first registered in 2004 and was first registered with Mutual of Omaha Investor Services from February 2017 to February 2018. The only disclosure for Chiarito on BrokerCheck is under the heading "Customer Dispute - Closed-no Action/Withdrawn/Dismissed/Denied." In that entry, we are informed that on November 16, 2017, Chiarito's employer Signator Investors, Inc. received a customer complaint seeking $25,000 in damages based upon these allegations:

A non-customer of the firm alleges the representative did not disclose the downside risk of his investment. The individual requests return of his investment of $25,000.

If the disclosure involved a "non-customer" of Signator, then perhaps this event has nothing whatsoever to do with the revised Form U5 because a non-customer can't make a customer complaint. Then again, maybe the non-customer of Signator's was a customer of Mutual of Omaha's? Regardless of my ruminations, Signator Investors closed the matter referenced on BrokerCheck without action on January 13, 2018. BrokerCheck discloses that Chiarito was registered with Signator Investor from May 2016 to February 2017.

Maybe you know what the hell Claimant Chiarito was suing about. Hopefully she did and does. On the other hand, I come away clueless after reading, and re-reading, the FINRA Arbitration Decision. This perplexification doesn't seem the fault of the parties or their able lawyers. No . . . this mess falls solely in the laps of the arbitrators and their Decision. Then again, I tend to be a clueless fellow. Some folks who know me find that a charming attribute. 

Costello: Now I throw the ball to first base, whoever it is drops the ball, so the guy runs to second. 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.

Abbott: Yeah, it could be.

Costello: Another guy gets up and it's a long fly ball to Because. Why? I don't know. He's on third, and I don't give a darn!

Abbott: What was that?

Costello: I said, I DON'T GIVE A DARN!

Abbott: Oh, that's our shortstop!