Oppenheimer Wins FINRA Arbitration Award For Stabilization Compensation

February 4, 2020

For many of Wall Street's associated persons, the industry's voluminous rule book is filled with new and unfamiliar proscriptions. Which might explain why so many folks tend to violate the same old rules over and over but still profess ignorance. On the other hand, c'mon, there are just some folks who view rules and regulations as challenges to be overcome and circumvented. Be that as it may, in today's blog we cover, yet again, the scenario of an industry employee who walked away from a job at a time when commissions had been paid but not fully earned, or so the former employer argued. That prompted an Arbitration. That may only be the start of the Respondent's ordeal.

Case in Point

In a FINRA Arbitration Statement of Claim filed in September 2019, FINRA member firm Claimant Oppenheimer sought $8,729.85 in damages plus interest, and costs and fees. Respondent Wilcheck did not file an Answer and did not appear at the hearing. In the Matter of the Arbitration Between Oppenheimer & Co. Inc., Claimant, v. Michael W. Wilcheck, II, Respondent (FINRA Arbitration Decision 19-02886) https://www.finra.org/sites/default/files/aao_documents/19-02886.pdf. As set forth in the FINRA Arbitration Decision, Claimant Oppenheimer had alleged that:

[W]hen Respondent resigned, his commissions generated, which were attributable to two stabilization agreements (the "Agreements"), did not equal the production level at which he had been compensated. Claimant further alleges that, as result [sic], Respondent was overpaid and Respondent is obligated by the agreements to repay Claimant.

The sole FINRA Arbitrator found Respondent Wilcheck liable and ordered him to pay to Claimant Oppenheimer $8,729.85 in compensatory damages and $750 in filing fees.

Bill Singer's Comment

No . . . not a case involving allegations of massive fraud or even involving anything beyond the mundane. It's merely offered as a reminder. As a warning. Frankly, for Oppenheimer, this is not unfamiliar territory -- the firm has a track record of going after its former reps (including those who represent themselves pro se) for overpaid compensation. See, for example, "Days Late and Dollars Short For Former Oppenheimer Employee" (BrokeAndBroker.com Blog / February 4, 2018 ) http://www.brokeandbroker.com/3824/finra-stabilization-agreement/  

Whatever Wilcheck's situation, he failed to contest his former employer's claims and is now burdened with the above Award. Pointedly, he now faces a suspension for any failure to pay the Award. SeeFINRA Rule 9554: Failure to Comply with an Arbitration Award or Related Settlement or an Order of Restitution or Settlement Providing for Restitution

(a) Notice of Suspension or Cancellation

If a member, person associated with a member or person subject to FINRA's jurisdiction fails to comply with an arbitration award or a settlement agreement related to an arbitration or mediation under Article VI, Section 3 of the FINRA By-Laws or a FINRA order of restitution or FINRA settlement agreement providing for restitution, FINRA staff may provide written notice to such member or person stating that the failure to comply within 21 days of service of the notice will result in a suspension or cancellation of membership or a suspension from associating with any member. When a member or associated person fails to comply with an arbitration award or a settlement agreement related to an arbitration or mediation under Article VI, Section 3 of the FINRA By-Laws involving a customer, a claim of inability to pay is no defense. . . .

Assuming Wilcheck declines to honor the Arbitration Award, now what? In FINRA Regulatory Operations, Complainant, v. Robert Jay Pincus, Respondent (FINRA Office of Hearing Officers Expedited Decision, Exp. Proc. No. ARB180031,
STAR No. 20180600911 / February 7, 2019)
https://www.finra.org/sites/default/files/OHO_Robert-Jay-Pincus_ARB180031.pdf, we have the matter of former Oppenheimer employee Pincus, who upon his April 2017 departure from the firm, owed $279,308.47 on three forgivable loans. Thereafter, on June 9, 2017 [Ed; footnotes omitted]:

[O]ppenheimer filed an arbitration claim against Pincus with FINRA Dispute Resolution (FINRA Arbitration No. 17-01514) seeking repayment. On November 9, 2017, a FINRA arbitration panel rendered an award in favor of Oppenheimer and against Pincus for $288,863.12, plus interest and fees ("Award"). On that date, FINRA notified Pincus's counsel of the Award and that if Pincus did not pay it within 30 days, FINRA could suspend Pincus's registration. 

Pincus did not satisfy the Award, enter into a fully executed, written settlement agreement to pay the Award, file for bankruptcy protection, or file a motion to vacate the Award. As a result, on September 24, 2018, FINRA served Pincus with a Notice of Suspension notifying him that his registration would be suspended effective October 15, 2018, for failing to pay the Award. The Notice of Suspension also advised Pincus that he could request a hearing, which would stay the effective date of the suspension. Pincus timely filed a request for a hearing and claimed he has a bona fide inability to pay the Award. A hearing was held by telephone on November 29, 2018.

The OHO Decision found that Pincus failed to establish any of the permissible defenses provided in FINRA rules or caselaw, and had failed to prove a "bona fide inability to pay." In his arguments, Pincus had asserted that, in fact, he had [Ed; footnotes omitted]:

attempted to negotiate a settlement with Oppenheimer to repay his outstanding loans but Oppenheimer rejected his proposals. Pincus testified that prior to the entry of the Award, his counsel offered the firm a $50,000 down payment and a payment plan to satisfy the balance of the loans. Pincus did not specify any additional amounts that he offered to pay as part of the proposed payment plan. He claimed that Oppenheimer refused his offer and refused to accept partial payment of the outstanding loans.

After the Award was issued, Pincus did not attempt to negotiate a settlement with Oppenheimer until the week of this hearing. Again, Pincus did not specify the settlement terms offered to Oppenheimer, but he testified that Oppenheimer refused this offer as well. 

Notwithstanding Pincus's references to various failed settlement attempts, the OHO Decision orders that:

[P]ursuant to Article VI, Section 3 of FINRA's By-Laws and Rule 9559(n), Pincus is suspended from associating with any FINRA member in any capacity, effective as of the date this Decision is issued. The suspension shall continue until Pincus provides documentary evidence to FINRA showing that (1) the Award has been paid in full; (2) he and the claimant have agreed to settle the matter (and he is in compliance with the settlement terms); or (3) he has a petition pending in a United States Bankruptcy Court, or the debt has been discharged by a United States Bankruptcy Court.

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