by Bill Singer
Last Man Standing Gets An Expungement
July 30, 2010
In a FINRA Arbitration Statement of Claim dated June 10, 2008, Claimant Michael E. Caradimitropoulo sought $2,000,000 in compensatory damages plus other relief because of losses sustained in allegedly fraudulent transactions involving Nektar Therapuetics and Melco stock. Respondents GunnAllen Financial, Inc., the Concord Equity Group, L.L.C. and Anthony Tricarico generally denied the allegations, and Tricarico sought expungement of his Central Registration and Depository (CRD) record. In the Matter of the Arbitration Between Michael E. Caradimitropoulo, Claimant, vs. GunnAllen Financial, Inc., the Concord Equity Group,L.L.C. and Anthony Tricarico, Respondents. (FINRA Arbitration 08-01950, July, 23, 2010).
2009 Settlements
In September 2009, Claimant and Respondents GunnAllen and Tricarico entered into a settlement agreement. In June 2010, Claimant and Respondents Concord and Tricarico entered into a separate settlement agreement. Subsequent to the settlements, Respondent Tricarico requested a hearing on the issue of his expungement.
In April 2010, Respondent GunnAllen filed for bankruptcy and, as a result, all legal claims against that firm were stayed, and the FINRA Arbitration Panel made no determination with respect to any claims against the firm.
On July 13, 2010, the FINRA Panel conducted a telephonic hearing to permit oral arguement and the submission of evidence on behalf of Tricarico's requested expungement. Claimant did not object to the expungement.
Expungement
The FINRA Arbitration Panel found that the the majority of shares at issue were purchased through brokers other than Respondent Tricarico. Moreover, the Panel determined that Tricarico "diligently kept Claimant informed of developments regarding the company (Nektar Therapeutics) whose shares were the major portion of the claimed losses in this matter." Further, the Panel noted that Claimant had received numerous research reports on Nektar from Tricarico, and that Claimant had personally contacted certain officers of Nektar regarding the company's activities. Finally, the Panel described Claimant as "sophisticated, regularly invested in high risk securities and was able to sustain losses in them, and made his own investment decisions."
During the telephonic expungement hearing, Claimant's counsel confirmed that Tricarico had "not participated in the settlements with respondents GunnAllen and Concord and had paid no money in connection with those settlements, at least one of which was paid by an insurance company."
Consequently, the Panel concluded that there was no basis for any claim or other improper actions regarding Respondent Tricarico's activities in connection with Claimant's arbitration.
The Panel recommeded the expungement of all reference to Claimant's arbitration from Respondent Tricarico's CRD records, with the understanding that in accordance with Notice to Members 04-16, Tricarico must first obtain confirmation of the expungement from a court of competent jurisdiction and must name FINRA as an additional party in that confirmation petition.
Bill Singer's Comment: As many an individual broker learns -- to his or her dismay -- just because an arbitration settles doesn't mean that you automatically get an expungement. Moreover, whether you personally settle with a complaining customer is not the focus of the regulatory reporting requirement. The focus is whether the matter settled and for how much. If you read Item 14I on the Form U4 you will note the following language:
(1)Have you ever been named as a respondent/defendant in an investment-related, consumer-initiated arbitration or civil litigation which alleged that you were involved in one or more sales practice violations and which . . .
(d)was settled, on or after 05/18/2009, for an amount of $15,000 or more?
When you decipher the above question, you should note the three red highlighted words: arbitration which settled. Many registered person get tripped up by misunderstanding the meaning of the above U4 question. It is NOT asking whether "you" settled. It is asking whether the matter settled. As such, even if you didn't pay a penny in settlement and even if you didn't agree to the settlement, you might still have a "Yes" answer to the question.
Entirely separate from the issue of the Yes answer on the U4 is whether you retain a regulatory record on CRD. In this case, Respondent Tricarico was confronted with an arbitration that effectively evaporated into settlements with which he did not participate and then the bankruptcy of his broker-dealer. It's tough to preserve your good name when you lack opponents or a ring in which to fight. To Tricarico's credit, he fought the good fight here and presented a compelling case that gained the Panel's proposed expungement of his record.