November 10, 2022
In today's featured FINRA arbitration, we got an investment banking dispute involving a breach of contract. Added into that mix, we got an inaccurate Form ADV. Frankly, there's a whole lot of nothing and a little bit of something swirling around here, but the Claimant's lawyer seems to have grabbed the arbitrators' attention and made a point. And that point rang up the proverbial cash register in Claimant's favor. In the end, the FINRA Arbitration Panel seems perturbed by Respondents' "inattentiveness" and hit them with a fee that isn't often awarded in full.
Case in Point
In a FINRA Arbitration Statement of Claim filed in October 2020, FINRA member firm Intellivest Securities asserted breach of contract relating to "an investment banking agreement between Claimant and Respondents." Respondents generally denied the allegations and asserted affirmative defenses.
In the Matter of the Arbitration Between Intellivest Securities, Inc. v. Gratitude Management LLC and The Builders Fund, LP, Respondents (FINRA Arbitration Award 20-03652)
The FINRA Arbitration Panel found Respondents jointly and severally liable, and ordered them to pay to Claimant "interest on the $24,000.00 paid in settlement before the final hearing at the rate allowed by Delaware law per annum from April 16, 2017, through and including the date the accrued interest is paid in full" plus $10,500 in expert costs. Notably, the Panel imposed the full $10,800 in Hearing Session Fees solely on the Respondents. The Panel offered this "Explanation of Decision":
During the course of the hearing, the Panel learned that the Respondents filed an inaccurate Form ADV by listing Claimant as its marketing representative for six years. This failure is consistent with the Panel's observation of the Respondents' inattentiveness to its obligations under contract and law. For these reasons the Panel has determined to assess the entirety of the forum fees to the Respondents.
Bill Singer's Comment
https://www.brokeandbroker.com/6757/td-ameritrade-arbitration/, in which I noted in part that:
The losing party, TD Ameritrade, was assessed a $325 Member Surcharge and $250 in hearing session fees.
The winning party, Birkes, was assessed a $325 filing fee against which the FINRA Arbitrator ordered TD Ameritrade to pay the $75 non-refundable portion -- leaving Birkes on the hook for $250 in filing fees. Also, the Arbitrator assessed $250 in hearing session fees against Birkes.
Why the hell should a pro se public customer have to pony up $250 in filing fees and $250 in hearing session fees when the Arbitrator found in his favor for the piddling amount of $4,300? Those assessments equal about 12% of the customer's Award. Why didn't the Arbitrator transfer those costs to TD Ameritrade? Seems to me those questions deserved a brief, perfunctory explanation in the Award; however, in keeping with FINRA's penchant for playing hide-and-seek with the explanations and rationales in its Arbitration Awards, we got nothing in the way of guidance. . . .
In Intellivest, the Claimant was ably represented by veteran industry lawyer Daniel H. Kolber, who clearly persuaded the FINRA arbitrators to go the extra mile and not simply halve the forum fees. Frankly, it's about time that FINRA Arbitration Panels imposed hearing fees entirely against the losing party when the facts justify such an Award. Compliments to FINRA arbitrators David Paul Clark, Julie K. Chapin, and Richard Pearce Moultrie for doing the right thing.