Public Customers Win (Sort Of) Undelineated Cause of Action In Oddball FINRA Arbitration

October 13, 2021

Sometimes you're wrong. Frankly, we're all wrong sometimes. In a recent FINRA arbitration, we have a registered representative who was wrong. To his credit, he owned up to his error. He made a mistake, as we all do. He was willing to pay for the damages he caused but apparently he was unwilling to overpay. Such is the stuff of failed settlements and the roll of the dice in litigation. 

Case in Point

In a FINRA Arbitration Statement of Claim filed in April 2021, pro se public customer Claimants Young and Chana sued associated person Respondent Cobb and sought $35,107.62 in damages.. In the Matter of the Arbitration Between Malesa Lynn Young and Kurt Eugene Chana, Claimants, v.  Brian Allan Cobb, Respondent (FINRA Arbitration Award 21-01028)  

Undelineated Cause of Action

As to the specifics of Claimants' claims, well that's a tad difficult to express with precision -- so, let's see how the FINRA Arbitration Award handled that issue:

In the Statement of Claim, Claimants did not delineate a specific cause of action against Respondent but asserted there was a dispute between Claimants and Respondent after the passing of Claimants' father, Respondent's previous customer. The dispute relates to the fees quoted by Respondent in selling Claimants' stock.

Oh my, now that must have been a tough Answer to draft; after all, the "Claimants did not delineate a specific cause of action." Not exactly sure how FINRA would allow an Arbitration to proceed in the absence of a specific cause of action, but, then again, lots of things surprise me these days. What came as no surprise to me, however, was that Respondent Cobb generally denied the allegations, asserted affirmative defenses, and sought an expungement of the matter from his Central Registration Depository record ("CRD") -- and, for good measure, Cobb sought a "cease-and-desist order be entered against Claimants to prevent any further defamatory statements regarding Respondent and his employer, Edward Jones."

Per An Agreement

At some point, things began to happen with this case. I'm not quite sure what those things necessarily were but let me share with you that:

On July 19, 2021, Respondent withdrew his request for a cease-and-desist order and temporary restraining order against Claimants, per an agreement between the parties. Therefore, the Arbitrator made no determination with respect to this relief request. 

On August 3, 2021, Respondent submitted an affidavit attesting to the underlying facts and events of the case. 

The Arbitrator conducted a recorded hearing by videoconference on September 2, 2021, so the parties could present oral argument and evidence on Respondent's request for expungement. 

Claimants participated in the expungement hearing and opposed the request for expungement.

Per an agreement between the parties, Cobb withdrew his request for the C&D. What kind of an agreement?  Agreement about what? Are we talking settlement -- full or partial? I dunno. The Award ain't sayin'. So, make up whatever the hell ya want.

As July 2021 rolls into August 2021, Cobb submitted an affidavit attesting to facts and events. Attesting to facts and events that differed from what he set forth in his Answer? And how do the Affidavit and the Answer vary, if they do? And if they don't, then why did Cobb need to submit an Affidavit if he was merely confirming what was in his Answer, or not, or maybe, but, then again, like, you know, who knows, right?

With the onset of September 2021, the sole FINRA Arbitrator conducted a videoconference "on Respondent's request for expungement." Of course, here I am, wonderin', what happened to the videoconference thing involving evidence about the underlying customer complaint? Waddya think?


The sole FINRA Arbitrator found Respondent Cobb liable and ordered him to pay to:
  • Claimant Young: $9,278.45 in compensatory damages
  • Claimant Chana: $9,278.45 in compensatory damages
The Arbitrator denied Cobb's requested expungement.

Arbitrator's Rationale

If you're as lost as I am, welcome to the land of the lost. See if the Arbitrator's rationale helps you out:

This matter was decided only as to commissions and related fees set forth in the Statement of Claim. No other damages were sought, or evidence provided, by Claimants pursuant to any other theory or claim at law or in equity. I find that Claimants were informed of the actual commission percentages before the trades were entered. As they chose to make the transactions after being told by Respondent that the earlier commission percentages were in error, the ultimate causation for the alleged damages rested with them and not Respondent. However, the additional plus charges and transactions fees for trades were not disclosed properly prior to the trades being entered and the liability for that omission rests with Respondent. 

Although unintentional, Respondent failed to advise Claimants of the additional plus fees and transaction fees added for each trade. This left Claimants with insufficient, inaccurate information as to the actual costs of the transactions. Consequently, they could not make a fully informed decision to make the trades and incur the costs, not make the trades, or, in the alternative, move the accounts elsewhere. Failing to disclose the accurate charges associated with selling securities in these customers' accounts after they requested the same was the Respondent's mistake and a sales practice violation. No further or other relief is granted. 

It is to be noted that Respondent to his great credit, as testimony to his character and contrary to his best interests testified that he did make a mistake in failing to provide to Claimants the additional plus charges and transaction fees for each trade. Had he not testified and voluntarily made that known to the Arbitrator, the decision in this case would be otherwise. 

Bill Singer's Comment

Compliments to the FINRA Arbitrator on a very nicely written rationale -- and I say that with sincerity. I may not be quite as thrilled with the body of the Award but the rationale ticks off some of the previously unchecked boxes involving some unstated facts. Moreover, it's nice to see the Arbitrator's nod in the last paragraph above to Cobb's character and honesty. 

The Ed Jones BrokerCheck Version

FINRA's online BrokerCheck database asserts as of October 13, 2021, that Edward Jones received the customers' complaint on June 30, 2020, and characterized the allegations as follows:

The client's [sic] alleges that the commissions to liquidate their accounts was misrepresented and has asked for reimbursement of difference.

Edward Jones asserted that the "client's" sought $35,107.62 in damages and the firm denied the demand on July 9, 2020. After being told to pound dirt, the Claimants served the firm with the FINRA Arbitration Statement of Claim in April 2021.

A Gamble Apparently Paid Off

Just going by the roughly $35,000 in damages sought by the Claimants, Cobb's decision to contest the FINRA Arbitration complaint seems to have paid off, to some extent. After all, by contesting the customers' allegations at the arbitration, Cobb wound up with a total award against him of $18,556.90, which is about half of the initial damages demanded. Of course, Cobb also needs to factor in the $750 Member Surcharge, the $3,850 in Member Process Fees, the $1,150 expungement hearing session fee assessed against Cobb, and any legal fees, costs and expenses. Maybe Ed Jones will eat some of that?

The Deceased Father

I'm not quite sure why the Arbitration Award referenced the Claimants' deceased father:

[T]here was a dispute between Claimants and Respondent after the passing of Claimants' father, Respondent's previous customer. The dispute relates to the fees quoted by Respondent in selling Claimants' stock.

As it turned out, that was the only reference in the Award to Claimants' deceased father. Which begs the question of why it was even raised in the Award. On the one hand, we are informed that the dispute arose after the father's passing; but, on the other hand, we're told that the dispute related to fees attendant to Respondent Cobb's sale of Claimants' stock. What the hell did the "passing of the father" have to do with a dispute involving sales of the son and daughter's stock -- and if there was some connection, then why wasn't there at least one or two sentences of explanation? And, puhlease, spare me your thoughts and opinions on the issue -- I too have my own back-story. Unfortunately,  that's not how a FINRA Arbitration Award should be drafted or published -- this is not supposed to be a guessing game or a fill-in-the-blanks competition. If there is a point, explain. If there is none, then don't publish the reference.