What We Got Here Is Failure to Communicate: An odd FINRA arbitration

February 11, 2010

Every so often an odd one comes along - and here is just such an example in the form of a Public Customer arbitration complaint against Fidelity. See, In the Matter of the Arbitration Between Jorge A. Perez, Claimant, vs. Fidelity Brokerage Services LLC, Respondent (FINRA #09-04340, February 9, 2010). Moreover, we have a Decision that seems to combine the linguistic stylings of Yoda from Star Wars with the pithy insights of the Road Prison Captain in the movie Cool Hand Luke.

Claimant Perez filed a Complaint against Fidelity on July 16, 2009, alleging

that there had been a communications failure between the Claimant and Respondent in respect of Respondent's handling of the Claimant's request that his Account with the Respondent be reopened on a certain date.

I'm channeling Strother Martin from Cool Hand Luke:  What we got here is failure to communicate. Lemme see, boss,  if I got the premise right.

Perez had a Fidelity account. That account was apparently closed. Perez asks that it be reopened on a particular date.

We all on the same page?

Perez claims that after he instructed Fidelity to reopen his account, that the brokerage firm denied his request. As the FINRA decision less than eloquently explains:

[Perez] had been denied that opportunity by reason of his having been requested to present his request on a certain document which had been provided by the Respondent only to be advised that such document had been inappropriate to his account and that a further document would have to be provided (the period intervening the Claimant's initial inappropriate document reopening submission and the date of his ultimate on-correct documentation reopening submission, the "Intervening Period").

Yup, that's what the official FINRA decision states - verbatim! You or I can take a shot at deciphering the explanation, but since I'm writing this here blog, how about I go first?

Perez wanted to reopen his account. Fidelity asked him to submit his request through a "certain document" (let's call that "Form1"). After Perez filled out and submitted Form1, Fidelity told him that Form1 was inappropriate and that he needed to fill out yet another Form (we'll call that "Form2"). The FINRA decision describes Form2 as the "ultimate on-correct documentation reopening submission." Whoa - quite a turn of a phrase. An ultimate on-correct documentation reopening submission.  Hey, at least they used the simple-to-understand "Intervening Period."

Next,  the FINRA arbitrator determined that the effect of the miscommunications during the Intervening Period was that

Claimant, had not been able to realize upon the considerable market gains which had transpired during the Intervening Period.

What the hell?  Is Yoda out of work and biding his time writing FINRA arbitration decisions? The above decipher, best as can I: Claimant was unable to enter trades in his closed account during a period when the market went up big-time.

Respondent Fidelity likely rolled its eyes at the charges and said, hey, we made a minor mistake with some paperwork but Perez has to prove actual losses. You can't just give him money because the market went up and he couldn't enter trades. What if he was interested in shorting? Would you order him to pay us his speculative losses that were avoided by the paperwork snafu?

Claimant Perez likely argued with equal sincerity that, hey, Fidelity made a major mistake and prevented me from a huge killing in the market. I am faultless here. I did everything they asked and they screwed up, not me! You have to give me some bucks to compensate for all the profits that I didn't make. I'm thinking that $25,000 sounds like a fair amount.

To his credit, the FINRA Arbitrator conceded that "no precise calculation can be made of Claimant's resulting money damages, these have been estimated in an amount of $25,000.00." Where that $25,000 number came from or how it was estimated is not explained. 

What is explained and what does make sense is the Arbitrator's determination that "since this overall situation had transpired as the consequence of an administrative oversight by Respondent, the award of punitive damages would be inappropriate." Apparently, Perez asked for punitive damages but since the Arbitrator determined that Fidelity's miscues were not intentional, such an extreme remedy was not proper and denied. Also, the Arbitrator noted that because Perez appeared pro se (that's fancy Latin lawyer gibberish for he represented himself and didn't have to pay an over-priced lawyer), he could not be awarded attorneys' fees.

Apparently concluding that through no apparent fault of his own, Claimant Perez was given misinformation about how to reopen his account and, as a result, was prevented from entering potentially profitable trades, the Arbitrator awarded Claimant Perez $25,000 and required Respondent Fidelity to pay him a $425 reimbursement of his filing fees.  Indeed -- sometimes fact is stranger than fiction.