August 6, 2022
In settling three Reg S-ID cases on the same day last July, the SEC fined JP Morgan $1.2 million; UBS $925,000; and TradeStation $425,000. As veteran industry lawyer Aegis Frumento considers those fines, he sees that the SEC favored the richest of the regulated. Inevitably, the big boys get the regulations that they can tame; they press for the "best practices" that everyone else must follow; and they can afford to write-off fines as so-much CODB.
Here we are in the midst of a scorchin' August. We got runaway inflation. We got Covid. We got monkeypox. We got a brokerage industry struggling to get back on its feet. We got supply chain shortages. We got a hot war in the Ukraine. We got China playing war games around Taiwan. We got Congressional hearings about an insurrection. We got . . . well, you know what we got right? And in the middle of all that's going on, the Staff of the SEC dumps on the industry a meaningless bit of indecipherable guidance that is not an official "rule, regulation, or statement" of the SEC. It's not something even approved by the SEC. In case you were wondering, it has "no legal force or effect." It doesn't "alter or amend applicable law." It doesn't even create "new or additional obligations." It's just the SEC shootin' the breeze in August. Apparently with nothing else to do than churn out a useless bulletin, which, unfortunately, requires Wall Street's compliance departments to set aside the time to plow through the silliness.
As I presciently opined in June 2022, Judge Edwards' dramatic Leggett v. Wells Fargo opinion was reversed on August 2nd by the Court of Appeals of Georgia. As I had predicted, the appellate court found that the lower court had somewhat improperly substituted her opinions for those of FINRA's arbitrators and FINRA's Director of Arbitration. What the Court of Appeals presents to us is a shrug. It is an unfortunate excuse for public investors being deprived of the justice that would be rendered in a court but often goes missing in an industry-mandated arbitration forum.
In a recent FINRA Arbitration Award, an arbitrator mounts Rocinante and grabs a lance. Even though we are merely Sancho Pancho (who went along for the ride), still, we get to smile at the spectacle of Don Quixote tilting at windmills. Equity, due process, and justice vanquish the heartless, amoral application of the law. In these plague days, that's a nice change of pace. Also, it's one hell of a wonderful FINRA Arbitration Award penned with eloquence.