Selling Your Book of Business: One Arbitration At a Time

March 17, 2010

Pursuant to an Asset Purchase Agreement entered into between Claimant Vander Weide and Respondents on or about June 26, 2008, Vander Weide agreed to sell his financial services business to Respondents in exchange for a sum of money to be paid over a period of five years. In the Matter of the Arbitration Between Douglas D. Vander Weide (Claimant) vs. Richard J. Keeling, Robin Marshall, and David Jesse  (Respondents) (FINRA Arbitration 09-02187, March 5, 2010).  It appears that the agreement contemplated a number monthly installment payments beyond whatever front money was forthcoming.  As of February 10, 2009, the Respondents informed Vander Weide that they would not make any further payments.

Hide and Seek

What FINRA reveals to us, in all its inexplicable and unanswered glory, is that Claimant Vander Weide asserted Breach of Contract, and that Respondents denied his allegations and claimed to not have received the benefit of their bargain because of Claimant's actions (what they were, we are not told) and that the Respondents suffered lost revenue, to boot.  Moreover, for good measure, the Respondents further assert that Claimant's conduct constituted a material breach of the Agreement and that he did not act in good faith or fair dealing.

After considering the pleadings, the testimony, and the evidence presented at the hearing, the FINRA Arbitration Panel essentially decided as follows:

  • Respondents Keeling, Marshall, and Jesse, are jointly and severally liable for and shall pay to Claimant Vander Weide the sum of $71,000.00 in damages on the contractual arrearage. This is approximately one-half of approximately $142,000.00 of unpaid compensation called for through June 30, 2009; and
  • Respondents Keeling, Marshall, and Jesse are ordered to fulfill the 4-year balance of the parties' contract according to its terms through June 30, 2013.

Say What?

Did the Panel mean that Claimant was owed $142,000 in unpaid compensation through June 30, 2009, but were only awarding him half? Dunno.

Did the Panel mean that as of the June 30, 2009, the entire Agreement contemplated $142,000 in monthly installments and that only half ($71,000) was due and owing on that date with the balance still covered by four-years of remaining payments? Dunno. 

What exactly is required of the Respondents when the Panel ordered them to "fulfill" the remaing four-year term of the Agreement? You got it -- Dunno.

The Down and Very Dirty

Here's what I can explain to you: Arbitration is big bucks. 

Arbitration is a so-called "private" dispute resolution process in which many parties have many reasons for keeping things under wraps.  Should a self-regulatory organization such as FINRA further such confidential proceedings? -- well, that's a mixed bag of "yes" and "no."  As a lawyer who has represented Claimants and Respondents in arbitrations over the years (and who has served as a panelist and Chair at many hearings), I understand the nuances of this issue.  There are tremendous benefits to keeping things confidential.  The somewhat private nature of arbitration often encourages more speed in the process,  and verdicts are often reached within a shorter (and more financially economical) span than what litigants in a state or federal court trial would experience. 

In theory, the shortcuts in the process -- the terse decisions and the lack of substantive facts and explanations -- are theoretically greasing the wheels of justice.  Unfortuantely, sometimes that grease slips off the wheels and befouls the slopes -- and we get the infamous slippery slope.  In rushing to judgment we often find that we have, well, you know, rushed to judgment.  The question is whether the benefits inherent in such a scramble outweigh the risks.  If this case is an example, the answer is "no."

Once a FINRA arbitration case is adjudicated and a formal decision is issued by the panel, it is incumbent upon FINRA to require sufficient disclosure of the underlying facts and the Panel's rationale that prompted the conclusions, so as to render the Decision credible and useful. When FINRA fails to demand minimal excellence in the drafting of its arbitration decisions, the industry and the public are left to parse through ill-considered, confusing, quirky, and obfuscatory language.  We cannot solely blame the authors of these decisions for such shortcomings because FINRA seems to favor the bare-bones approach.  Like I said, arbitration is a business for FINRA and the more confidential the proceedings, the more the industry likes it.  The larger question is whether a regulator should nod in that direction.


In these difficult financial times, many registered representatives are seeking to realize some income from their books of business upon retirement.  They are entitled to visible road signs and functioning traffic lights.  They are entitled to reasonable warnings to slow down before being ticketed by hidden cops.  Speed traps are detestible whether on the road or on Wall Street -- and, sadly, that's all that I see in decisions such as Vander Weide. No, the arbitration panel here is not some officer of the law, siren blaring, who is chasing down the unwary out-of-town motorist.  However, the panel here offers little guidance, explains virtually nothing, and issues a decision that is virtually impervious to any meaningful inferences of fact or law. I believe that a major function of arbitration is to present a cogent fact pattern and then offer the Panel's rationale for reaching its decision (thus educating the industry), and, as such, I do not believe that Vander Weide has accomplished those goals.

 In the case at hand, consider these unanswered questions:

  • How much front money was paid by Respondents to Claimant -- and how were the balance of payments structured?

The FINRA Decision doesn't spell it out. 

  • What were the specific terms of the Agreement?

Again, your guess is as good as mine. 

  • Why did Respondents decide to stop paying the remaining notes?


  • Why did the payments stop on February 10, 2009?


  • Why did Respondents breach the Agreement?

We are never told.

Ask most veteran lawyers and we'll tell you the same thing: that lawsuits are most useful as post-mortems.  We read the decisions to figure out what went wrong and how to prevent a recurrence.  Unfortunately, FINRA arbitration decisions are less like detailed post-mortems and more like toe-tags on a cadaver: John Doe, male, probably 40 to 45 years of age.  Not much value in that, is there?

============================================================================================ New FINRA Cases Analyzed by Bill Singer

Regulatory lawyer Bill Singer has analyzed and posted the latest crop of FINRA disciplinary cases.  Frankly, it's not a pretty sight. 

  • How simple is it to steal a quarter of a million in insurance premiums?  How about you just submit a change of address form. CLICK HERE TO READ CASE
  • Why accuse a broker of "forgery," when you can engage in prosaic pyrotechnics along the lines of "Davis falsified the customer's signature on the application and submitted it to his member firm as authentic, causing the firm's books and records to be false and inaccurate." CLICK HERE TO READ CASE
  • The elderly have become attractive victims for many securities scams -- now we have a case where a supervisor is nailed for failing to properly supervise a miscreant who was ripping off the aged.  CLICK HERE TO READ CASE
  • You tell me.  Was a six-month suspension enough given FINRA's recitation of the facts?  CLICK HERE TO READ CASE And when you're done with that -- read this one.  CLICK HERE TO READ CASE



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