In today's featured FINRA Arbitration, we are reminded that he who hesitates is lost; and, while we're at it, how time and tide wait for no man (and no woman). Presented for your consideration is a lawsuit involving $3,500 in funds that seem to have disappeared in 2001. Was it Citigroup Global Markets' fault? Was the pubic customer at fault? Did anything extraordinary occur so as to warrant a tolling of FINRA's six-year Eligibility Rule? Do a whole host of sins simply get buried after 21 years -- no questions asked?
Case in Point
In a FINRA Arbitration Statement of Claim filed in September 2022, public customer Claimant Roberson, appearing pro se, asserted "breach of fiduciary duty; negligence; suitability; misrepresentation; fraud; failure to supervise; failure to conduct adequate due diligence; breach of contract; negligent and intentional misrepresentations; violation of state consumer protection statutes; and violation of FINRA rules of fair practice." In the Matter of the Arbitration Between Delice A. Roberson, Claimant, v. Citigroup Global Markets, Inc., Respondent (FINRA Arbitration Award 22-02014)
Claimant Roberson sought $50,000 in compensatory damages, punitive damages, interest, and disgorgement of commissions.
A Matter of Ineligibility
Respondent Citigroup Global Markets Inc. generally denied the allegations and asserted affirmative defenses. In February 2023, Respondent Citigroup filed a FINRA Rule 12206 Motion to Dismiss, which the sole FINRA Arbitrator granted.
SIDE BAR: FINRA Code of Arbitration Procedure for Customer Disputes Rule 12206: Time Limits:
(a) Time Limitation on Submission of Claims. No claim shall be eligible for submission to arbitration under the Code where six years have elapsed from the occurrence or event giving rise to the claim. The panel will resolve any questions regarding the eligibility of a claim under this rule.
(b) Dismissal under Rule. Dismissal of a claim under this rule does not prohibit a party from pursuing the claim in court. By filing a motion to dismiss a claim under this rule, the moving party agrees that if the panel dismisses a claim under this rule, the non-moving party may withdraw any remaining related claims without prejudice and may pursue all of the claims in court.
(1) Motions under this rule must be made in writing, and must be filed separately from the answer, and only after the answer is filed.
(2) Unless the parties agree or the panel determines otherwise, parties must serve motions under this rule at least 90 days before a scheduled hearing, and parties have 30 days to respond to the motion. Moving parties may reply to responses to motions. Any such reply must be made within 5 days of receipt of a response.
(3) Motions under this rule will be decided by the full panel.
(4) The panel may not grant a motion under this rule unless an in-person or telephonic prehearing conference on the motion is held or waived by the parties. Prehearing conferences to consider motions under this rule will be recorded as set forth in Rule 12606.
(5) If the panel grants a motion under this rule (in whole or part), the decision must be unanimous, and must be accompanied by a written explanation.
(6) If the panel denies a motion under this rule, a party may not re-file the denied motion, unless specifically permitted by panel order.
(7) If the party moves to dismiss on multiple grounds including eligibility, the panel must decide eligibility first.
(8) If the panel denies a motion under this rule, the panel must assess forum fees associated with hearings on the motion against the moving party.
(9) If the panel deems frivolous a motion filed under this rule, the panel must also award reasonable costs and attorneys' fees to any party that opposed the motion.
(10) The panel also may issue other sanctions under Rule 12212 if it determines that a party filed a motion under this rule in bad faith.
(c) Effect of Rule on Time Limits for Filing Claim in Court. The rule does not extend applicable statutes of limitations; nor shall the six-year time limit on the submission of claims apply to any claim that is directed to arbitration by a court of competent jurisdiction upon request of a member or associated person. However, when a claimant files a statement of claim in arbitration, any time limits for the filing of the claim in court will be tolled while FINRA retains jurisdiction of the claim.
d) Effect of Filing a Claim in Court on Time Limits for Filing in Arbitration. If a party submits a claim to a court of competent jurisdiction, the six-year time limitation will not run while the court retains jurisdiction of the claim matter
FINRA Rule 12206 is an eligibility rule that creates a six-year deadline from the occurrence or event giving rise to a customer's claim. If the ineligibility is sustained by a FINRA Arbitration Panel (or sole FINRA Arbitrator), the ensuing dismissal is without prejudice to the customer's right to pursue all of the claims in court. In Roberson v. Citigroup, the sole FINRA Arbitrator granted Respondent's Motion to Dismiss and dismissed Claimant's claims without prejudice.
Bill Singer's Comment
The sole FINRA Arbitrator offers this rationale for her Award:
FINRA rules do not permit Claimant to recover her $3,500.00 dated August 2001. The account was closed in November 2001. Account closing documents in 2001 show the account closed. No record of the cashed or uncashed check exist as federal rules only require such documents to be kept for a reasonable amount of time usually seven years. The burden of proof is on the Claimant and Claimant is unable to sustain her burden of proof. There is no evidence of fraud or any legal reason such as extraordinary circumstances which would permit tolling the eligibility rule and certainly not for an event that occurred in 2001.
So . . . Claimant Roberson filed a FINRA Arbitration Statement of Claim in 2022 as part of her effort to recover $3,500. Going by the Arbitrator's version of events, Roberson's Citigroup Global Markets' account was closed in November 2001. I'm not quite sure that I comprehend the Arbitrator's reference to "$3,500 dated August 2001," but that's a quibble at best: I don't know what is meant by that sum being dated August 2001. Regardless of my befuddlement with a dated sum of money, the reference involves something from over two decades ago, and that lapse of time certainly diminishes the importance of any clarification. The sole FINRA Arbitrator not only determined that no records exist as of the presentation of Claimant's case in 2023 but that virtually no legal requirement exists to retain such documents beyond seven years (which would have likely been 2008).
As to what transpired in 2001 between Roberson and Citigroup, there may have been a check dated August 2001 in the amount of $3,500 that constituted the proceeds of the liquidation of Claimant Roberson's account -- or not. The mechanics of this so-called dated sum are murky and likely clouded by the passage of two decades. We are told that there is no "record of the cashed or uncashed check," and that should come as no surprise after some 22 years.
In granting the Motion to Dismiss, the sole FINRA Arbitrator concludes her rationale by noting that here is "no evidence of fraud or any legal reason such as extraordinary circumstances which would permit tolling the eligibility rule and certainly not for an event that occurred in 2001." The Arbitrator determined that was no "extraordinary circumstances" to permit the tolling of FINRA's eligibility rule. To be clear, I think the Arbitrator sets out a reasonable rationale and likely made the proper Award.
Except . . . between August 2001 and November 2001 there was September 11, 2001. I wince when I see any assertion that 9/11 may not have been an "extraordinary circumstance" or merely another day. Clearly, the sole FINRA Arbitrator did not say that and I fully appreciate her comment was a broad sweep. If, in fact, 9/11 impacted customer Roberson's allegations, I would have like to have known whether she raised that issue and the nature of references. If she did not raise that date, so be it.
What fascinates me about this case is why Roberson waited until 2022 to file a claim about $3,500 that she seems to believe was owed to her by Citigroup since August 2001. That explanation is a pregnant question that persists in this dispute and I wish that the FINRA Arbitration Award offered us some insight as to what engendered the delay.
JPMorgan Seeks TRO Against Advisor Who Fled to Morgan Stanley / In a complaint filed last week, JPMorgan accused the advisor of criticizing its investment offerings and the advisor who replaced him, to induce clients to make the jump to Morgan Stanley. (Financial Advisor IQ by Glenn Koch)
CFPB Issues Guidance to Protect Homeowners from Illegal Collection Tactics on Zombie Mortgages / It is illegal for debt collectors to sue or threaten to sue to collect debts past the statute of limitations (CFPB Release)
Former Chief Financial Officer Of Two SPACs Sentenced To 36 Months In Prison For Fraud Scheme / Cooper Morgenthau Embezzled More Than $5 Million and Caused False Statements to be Made to Accountant and Auditor and in SEC Filings (DOJ Release)
Georgia Man Indicted for Scheme to Defraud Elderly Suffolk County Victim of More Than $5 Million / Defendant and his Co-Conspirators Falsely Told Victim to Send Millions of Dollars to Claim Certificate Needed for "Inheritance" (DOJ Release)
Federal Court Orders South African CEO to Pay Over $3.4 Billion for Forex Fraud CFTC’s Largest Fraud Scheme Case Involving Bitcoin / Highest Civil Monetary Penalty Ordered in a CFTC Case (CFTC Release)