March 25, 2021
In a recent FINRA regulatory settlement, Wall Street's so-called self-regulatory-organization piles up the allegations but something just doesn't add up here. Client confidences seem to have been abused. FINRA Rule 2010's lofty standard that "A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade," seems to have been violated. Then there is the back-story that never sees the light of day in the AWC. It was a lurid tale that first caught our attention when in 2016, Cantor Fitzgerald employee Lee Stowell couldn't find her Bernie Sanders mug on her desk. When she finally found it in an office kitchen cabinet, it was filled with feces. Ah yes, another shit-storm hits Wall Street. Let's see how FINRA wipes up.
Case in Point
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Riaz Haidri submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Riaz Haidri, Respondent (FINRA AWC 2017054288401)
The AWC asserts that Haidri entered the industry in 1993 and by May 2013, he was associated with Cantor Fitzgerald & Co. The AWC asserts that Haidri "does not have any relevant disciplinary history."
Going From A to B
The AWC asserts that in 2015, Haidri was the co-head of Cantor Fitzgerald's high-yield fixed income trading desk. In June 2015, the AWC alleges that Haidri became aware of the intention of a "Customer A" to establish a strategic position in a given company's bonds; and, in fact, starting in July 2015, Customer A effected bond purchases through Cantor in furtherance of building said position. Thereafter, the AWC alleges in part that:
[I]n August 2015, Haidri disclosed
Customer A's strategy, which was confidential information, to Cantor Customer B, which
he knew had a large short position in the bonds. Approximately 10 days later, Customer
B purchased the bonds from Cantor to partially cover its short position. In September
2015, Customer B asked Haidri to confirm the identity of Customer A, which he did.
Later in September 2015, Customer B purchased the bonds from Cantor on two separate
FINRA deemed Haidri's conduct to constitute a violation of FINRA Rule 2010; and in accordance with the terms of the settlement, the self-regulatory-organization imposed upon him a $15,000 fine, a three-week suspension with any FINRA member in all capacities, and a requirement that "Haidri will attend and satisfactorily complete five hours of continuing education, through a provider not unacceptable to FINRA, concerning handling of confidential information. . . ."
Bill Singer's Comment
According to online FINRA BrokerCheck records as of March 25, 2021, Haidri is still employed/registered with Cantor in the stated "Position" of "Head of High Yield."
https://www.bloomberg.com/news/features/2019-04-25/cantor-fitzgerald-doesn-t-want-this-woman-talking-about-her-mug-in-court As reported in part by Bloomberg's Porzecanski and Abelson:
As reported in the Securities Industry Commentator (February 28, 2020)
Stowell says Riaz Haidri, who helped lead the ex-Gleacher team, used information gleaned as a trader and co-head of her group to facilitate business for himself and his friends-at times violating company policy, she contends-without oversight. Several former employees back up her account. The more sales Haidri made, the more important he became to Cantor, they say.
Haidri's behavior hurt those salespeople, like Stowell, who were outside his all-male inner circle, according to her complaint. It also hurt their clients. Stowell, whose pay, like that of the other salespeople, was entirely based on commissions, believes she was kept out of that circle because she's a woman. As her boss, Haidri "systematically" took accounts and trades away from her, even after she complained about his practices, according to her suit. In a court filing, Haidri denied Stowell's accusations. . . .
. . .
As far as her issues with Haidri's trading go, Cantor's compliance department found no wrongdoing, according to the person familiar with the firm's thinking. But over the years, multiple people have complained to senior managers about his trading practices, according to former employees who spoke to Businessweek on the condition of anonymity. Following a separate dispute, Finra is probing Haidri's practices for potential regulatory violations stemming from his use of confidential information about clients for his advantage, according to people familiar with the probe. Finra and Cantor declined to comment.
As set forth in part in the Opinion [Ed:footnotes omitted]:
In this action arising out of employment-related claims based on alleged violations of the New Jersey Law Against Discrimination (LAD), we consider whether a dispute resolution policy and agreement (DRPA) sent by email and requiring an electronic signature was sufficient to compel plaintiff to litigate her claims in an arbitration forum, instead of before a judge and jury.
Because plaintiff had to scroll through the DRPA before she could electronically sign it, and she confirmed in the click box that she had read and accepted the terms of the DRPA, we are convinced the DRPA satisfied the requirements of Leodori v. Cigna Corp., 175 N.J. 293 (2003). We therefore reverse the order denying defendants' motion to compel arbitration.
Okay, so like what the hell has FINRA been doing since April 2019?
A quick glance at the calendar reveals that it's now at least two years since Stowell made public her allegations, as reported above in the press, that Haidri had "used information gleaned as a trader and co-head of her group to facilitate business for himself and his friends . . . Several former employees back up her account." It appears that Stowell delivered the regulatory case underpinning the AWC to FINRA gift-wrapped and with a tied bow.
Just how much investigative work was required of Wall Street's self-regulatory-organization to verify Stowell's allegations? More to the point, what was being so meticulously investigated during the past two years?
Gven the seriousness of the AWC's allegations, are you shittin' me? A three week suspension and CE? Wow, either FINRA has grotesquely over-stated the allegations here (which happens) or something else is going on behind the scenes. Then again, I never know what I don't know.