Blind, Dumb and Heartless Justice

March 6, 2008

I just received the letter below from one of's subscribers. The writer is commenting on
Other than deleting the sender's name, I have reprinted his comments and my reply.

re Lyons v Merril
Maybe I'm missing something but:
1. Ms. Lyons could have requested reimbursement of all costs associated with the expungement.
2. If the above wasn't requested the arbitrator should have provided for the above in his order.
3. Ms Lyons could go back to Merrill and ask them to have their lawyers go to court to handle the expungement.
4. If Merrill refused above Ms. Lyons could go into swear out a Small Claims summons against Merrill for legal costs; Merrill would just write a check at that point.
FINRA's regulations with regard to this stuff is heartless as you say but Ms. Lyons can still get this done per above.
Great newsletters.



Thank you for taking the time to contact me with your comments. Sincerely, I appreciate the input.

As to all of your above suggestions, I concur. However, I think you miss a key aspect, which is WHY did Ms. Lyons need to incur the costs and inconvenience of an arbitration proceeding in the first place? I have long argued that in such intra-industry U5 language disputes, that there should be an appellate board at CRD where RRs could seek intervention and rectification of precisely the type of dispute that Lyons had with her employer. If I can infer the facts from the sparse arb decision, it appears that she believes she resigned from Merrill and that they may have been in the midst of a reduction in force and lumped her resignation into a bulk U5 notice for numerous employees who had been laid off. As such, she winds up with an "OTHER" when it should have been "VOLUNTARY". Frankly, I found it somewhat touching that Lyons cared enough to insist that the basis for her separation from Merrill be precise--but that our industry as a whole were so committed to such accuracy in its dealings.

It's not so much that Lyons is an aberration because this case is not. It is far too symptomatic of the hostility and insensitivity individual registered persons face when dealing with their industry's regulators; even in a situation, such as this, where there is no public customer involved and absolutely no wrongdoing by the employee. Pointedly, Lyons is a situation in which the employer and employee agree as to the employer's clerical miscue. Why then, did this RR still need to go to an arbitration proceeding to resolve the problem?

The issue is not what Ms. Lyons could do in addition to the byzantine process she navigated, but how many other similarly situated RRs are overwhelmed by the daunting procedures and simple accept the unfairness on the U5? Keep in mind that even with Merrill's acceptance of its culpable conduct, even with no facts in dispute, even with a Stipulated Settlement, even with an arbitrator's Award---the matter is still not finished. No, Lyons now needs to enter the court system in order to get the award confirmed, and then she needs to submit that to CRD. This sounds more like something designed by Kafka.

It is quite possible that as part of the private discussions attendant to the stipulated settlement that Lyons and Merrill agreed to the very remedies you raise. However, keep in mind that FINRA firms are absolutely immune from suit concerning defamation on Forms U5, so even for a skilled lawyer the drafting of a claim upon which to obtain monetary damages poses a puzzle. Maybe the employer reimbursed her or provided her with in-house/outside counsel for the court confirmation. Still, why do we burden our industry with such costs and delays? Moreover, what about all the other cases in which the employer panics when confronted with a former employee's allegation of an erroneous U5 disclosure? Surely you are aware that in today's paranoid regulatory environment, no member firm is eager to admit any negligence with its filings.

As such, if a firm refuses to cooperate in the amicable resolution of a U5 dispute, can't we at least provide an accelerated, free process by which an aggrieved employee can present his or her proof directly to CRD and ask for administrative relief? If that CRD appeal board does not believe that the employee has presented sufficient proof of a clerical/administrative error, then, yes, direct the dispute to arbitration. But why must we always be so rigid with the regulation of individual RRs? Your comments are fair and on point. Nonetheless, you raise a host of shouldas and couldas as options. While it may be reasonable to suggest that Lyons could have done X or should have done Y, please keep in mind one overlooked reality. Many Wall Street employees are in shell shock. Their firms are closing. Their desks are shut down. Their firms are slashing staff. Whether these thousands of men and women are laid off or voluntarily quit, it must be a devastating event for them and their families. And on top of all of this, we now direct them into the jaws of an arbitration system, then to the courts, and finally to CRD. As a nation we were outraged to see such insensitivity in the face of Hurricane Katrina's devastation. Do we never learn any lessons involving compassion?

In closing, I often say that although Justice is blind, I was not aware that she is also brainless and heartless. That is precisely the justice that Ms. Lyons was offered.