FINRA Arbitration Award Gives Us A Case of Gas From Chipotle Bean Burrito Puts

April 3, 2023

Two public customers alleged that an error made by their TD Ameritrade rep prompted a large margin call; and, as a result, they alleged they sustained about $264,000 in damages when forced to cover. FINRA arbitrators determined that the error involved negligence. So . . . how big a check did the arbitrators tell TD Ameritrade to write out to the customers? $300 --  reimbursement for part of their arbitration filing fee.

Case in Point

In a FINRA Arbitration Statement of Claim filed in May 2022 and as amended, public customer Claimants representing themselves pro se asserted that:

[A]n error by their financial representative, resulted in their account being placed in a larger margin call position. Claimants further alleged that in order to avoid account liquidation, they had to close additional positions to cover the margin position of their account.

In the Matter of the Arbitration Between Edward A. McCoy and Shirley J. McCoy, Claimants, v. Charles Schwab & Co., Inc. and TD Ameritrade, Inc., Respondents (FINRA Arbitration Award 22-00807)

At the FINRA Arbitration hearing, Claimants sought $263.955.43 in compensatory damages.

Respondents generally denied the allegations, asserted affirmative defenses, and sought the expungement of the matter from the Central Registration Depository record ("CRD") of an unnamed party.


The FINRA Arbitration Panel published under "FINDINGS":

Claimants proved negligence during the telephone call by showing TD Ameritrade incorrectly advised the Claimants regarding the relief to be gained from rolling their Chipotle puts. However, Claimants failed to establish evidence of their damages, if any. Charles Schwab should be dismissed with prejudice, as they had no responsibility.


The FINRA Arbitration Panel found Respondent TD Ameritrade liable and ordered it to pay to Claimants $300 to reimburse Claimants for the non-refundable portion of the claim filing fee previously paid to FINRA Dispute Resolution Services. Further, the Panel recommended the expungement of the complaint from the unnamed party's CRD having found pursuant to FINRA Rules 12805 and 2080 that the Customers' claim, allegation, or information is false based upon a finding that the trade was authorized.

Bill Singer's Comment

Virtually nothing set forth in this FINRA Arbitration Award makes any sense to me, and this Award is yet the latest exhibit in an overlong array of piss-poor-often-incomprehensible FINRA Arbitration Awards. As best I can infer, this arbitration involved an apparent dispute about

  • an "error,"
  • a rolling Chipotle put, 
  • margin, and
  • liquidations required to cover a margin call. 

The magnitude of the alleged error and its aftermath seem to have convinced the Claimants that they sustained over $260,000 in damages. As to what was the nature of the error, the Award says nothing beyond this:

TD Ameritrade incorrectly advised the Claimants regarding the relief to be gained from rolling their Chipotle puts

Okay, so, lemme see here . . . Claimants alleged that Respondents made an "error," and the three FINRA Arbitrators found that Respondent TD Ameritrade "incorrectly advised" Claimants about "the relief" from rolling Chipotle puts. Except we're never told in the Award the exact nature of the alleged error or the negligent advice. We're not told the terms of the trades at issue. We're not told as to the costs of the trades and/or any resulting profits or losses.

Apparently, the Arbitrators are slicin' and dicin' through the nuance of what's an "error" versus what's "incorrectly advised." Furthermore, the Arbitrators seem to have determined that incorrect advice does not rise to the level of an "error." Given the lack of any explanation in the Award about the transaction, for all we know,  the arbitrators were talking about a customer placing an order for a Chipotle burrito filled with cilantro-lime rice, black or pinto beans, meat, salsa, and cheese or sour cream.

Inexplicably -- bizarrely -- despite finding that TD Ameritrade provided incorrect advice, the FINRA Arbitration Panel somehow concluded that the Claimants' "allegation, or information is false based upon a finding that the trade was authorized." How the hell do customers authorize a trade that was recommended via incorrect advice? In an infuriating outcome, the Panel renders a slap in the face of the Claimants via a measly $300 reimbursement while, at the same time, recommending an expungement to the unnamed party. The Award does go to some pains to clarify that:

During the evidentiary hearing, before the conclusion of Claimants’ case-in-chief, Charles Schwab made an oral motion to dismiss on the grounds that Charles Schwab had no involvement with the transactions in question. Herein, the Panel grants Charles Schwab’s motion to dismiss on the basis that Charles Schwab had no involvement with the transactions in question.

Okay . . . fine . . . cross off Schwab; but that doesn't give the arbitrators a free pass when it comes to explaining why they found TD Ameritrade "liable." Of course, the bigger question is: Liable for what? And how is it that the Arbitrators awarded $300 in reimbursable filing fees but not a penny for any of the other nearly $264,000 in requested damages? Much like an over-filled bean burrito, this FINRA Arbitration Award delivers little more than gas.

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