Blog by Bill Singer Esq WEEK IN REVIEW

January 25, 2020
I applaud the federal court for its spot-on characterization of FINRA as "a private organization funded by the securities industry." All public-customer advocates and those who defend the industry's associated persons should frequently cite in boldface, upper-case, 16-point type, the Court's somewhat pejorative characterization. Indeed, FINRA is not a governmental organization, but, as the Court so aptly notes, "a private organization." Moreover, FINRA is a private organization that is "funded by the securities industry," which certainly places the self-regulatory-organization in the proper light.
Legal pundit Aegis Frumento, Esq. sees the Supreme Court's recent IBM v. Jander opinion as the embodiment of the so-called Trolley Problem, in which a conductor must choose between two bad outcomes. In Jander, the management committee of IBM's ESOP was charged with maximizing value; however, members of the committee were also senior IBM execs, who had obligations to their employer and were subject to the federal securities laws.  In their roles as IBM executives, members of the ESOP management committee became aware of alleged inside information that IBM's stock was overvalued because a division was performing badly. If the ESOP managers kept buying IBM stock, they would harm the ESOP participants if the stock's price fell when the negative news went public; however, if the managers acted on the inside information and stopped the purchases or sold, they would be running afoul of various company confidentiality rules and likely violating federal insider trading laws.
In 2005, Ty Storlie began working as an external wholesaler in Prudential Insurance of America's annuity business. In November 2017, when Storlie was 53 years of age with 18 months remaining before he would become eligible for Prudential's pension program, his employer informed him that his sales results were deemed "unacceptable," and his employment was terminated. On Storlie's Uniform Termination Notice for Securities Industry Registration ( the "Form U5"), Prudential's narrative under "Termination Explanation" was "Did not meet management's expectations. Not compliance related." Some might think that Storlie's age and his proximity to vesting in Prudential's pension program prompted the negative review and the ensuing termination. Clearly, Storlie did.