Blog by Bill Singer Esq WEEK IN REVIEW

July 2, 2022
The SEC charged Brinks with violating Dodd Frank Act Rule 21F-17 when the company required employees to sign confidentiality agreements in employment contracts and in severance arrangements. At issue was the employees' agreement not to provide information to government authorities without letting Brinks know in advance. At first blush, the SEC's case seems on firm ground; however, as lawyer Aegis Frumento reads Rule 21F-17, it only prohibits the enforcement or threatened enforcement of such agreements to impede communications to the SEC. From Aegis' perspective, an SEC action against parties based solely on the text of a confidentiality agreement, where no enforcement or threat of enforcement exists, is regulatory highway robbery.
In response to the Report, FINRA's lackluster Board of Governors is probably looking for a large rubber stamp. Wall Street's system of self-regulation is a morally bankrupt construct. Further, it is reprehensible that on top of its tepid self-policing, that the industry forces mandatory arbitration upon public customers and hundreds of thousands of associated persons. How nice it is that FINRA's Report asks us to take comfort that its arbitration system is policed by Staff who "generally adhere" to the organization's policies and procedures. Next time FINRA proposes to charge a broker-dealer or stockbroker for misconduct, that Respondent should argue that they "generally adhere" to the securities laws and FINRA's rules -- let's see how far that gets them with the regulator.
A FINRA Panel of Arbitrators found Citigroup Global Markets, Inc. ("CGMI"), Citigroup, Inc., and Citibank, N.A. guilty of discrimination, harassment, hostile work environment, and retaliation. All of which cost the Respondents $1.4 million in damages and attorney's fees. What's Wall Street's leading self-regulatory-organization, FINRA, going to do about those horrific arbitration findings? If past is prologue -- NOTHING. Actually, that's not entirely correct . . . FINRA's lackluster Board of Governors will likely create task forces and call for summits and hold conferences and develop an exam and propose to implement some initiative that will likely never quite get off the ground but, hey, the whole point is giving the appearance of action rather than actually acting, right? Why fix anything when you can just issue a press release! Blog publisher Bill Singer Esq. is no fan of non-solicit/non-compete provisions. Sure, there could be . . . there are . . . compelling fact patterns when a departed employee may have really gone over the edge and deserves to have the crap sued out of him. On the other hand, given that Wall Street is the purported bastion of free enterprise and Capitalism, it's a tad cynical to exalt the benefits of free markets and competition but, you know, then go sue folks for practicing what you preach. Bill often counsels employer-brokerage-firms to handle departing employees with class and grace. Wish 'em well. Let 'em know how much you valued their contribution and how much you regret the departure. Shake hands. Send a bottle of champagne or something when they open their new shop. Let 'em know that if things don't work out, you would always welcome an opportunity to renew the professional relationship in the future. Not a lot of brokerage firms follow Bill's advice. A more popular option is the scorch-the-earth-and-send-'em-a-message gambit. Sometimes it works. Sometimes not. Read about a recent federal case involving Edelman Financial Engines, LLC.