Header graphic for print
Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

Category Archives: Arbitration

Subscribe to Arbitration RSS Feed

Who wants to hear about pitfalls in the advisor/broker-client relationship

Posted in Arbitration, Breach of Fiduciary Duty, Compliance and Supervision, Conflicts of Interest, FINRA Compliance, FINRA Enforcement, Registered Representatives, SEC Compliance, Securities Litigation

Ernie Badway and I have prepared a series of podcasts that highlights client-issues and risk avoidance techniques for broker-dealers and investment advisors.  We hope you’ll take a listen.  

Who Wants To Avoid Being Sued In This Market

Posted in Arbitration, Financial Industry Trends, Public Customer Arbitrations, Punitive Damages, Registered Representatives

Now that I have your attention, there is a pretty tried and true method to avoiding customer complaints, especially in this volatile market. All too often, clients hide in their shelters when the market gets rough. The biggest mistake you can make is hiding in your own shelter. The best way to avoid a customer… Continue Reading

So You Think That You Really Know Your Customer

Posted in Arbitration, Compliance and Supervision, Registered Representatives

If the recent National Senior Investor Initiative of the SEC and FINRA taught us anything, it was the tremendous importance to know your customers. This takes on more significance when you are working with seniors. You may ask why does “knowing your customer” take on any more significance for these clients. For one, an investor’s… Continue Reading

Why Reverse Churning Does Not Create Cream From Butter.

Posted in Arbitration, Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA Enforcement, Public Customer Arbitrations, Registered Representatives

For years, firms have been using wrap products to charge an annual fee based upon the value of assets under management regardless of the number of trades, as opposed to fees per trade. In other words, wrap accounts were an effective tool to avoid churning claims because the customer theoretically could trade daily and only… Continue Reading

How to avoid being sued 2.0

Posted in Arbitration, Compliance and Supervision, FINRA Compliance, FINRA CRD, Public Customer Arbitrations, Registered Representatives, Securities Litigation

Over the years that I have defended financial advisors and their firms, I have frequently spoken and written about ways to avoid the risk of being sued. I prepared a guidebook a couple of years ago that detailed some common sense approaches to risk avoidance. I have updated that guidebook to take into account new… Continue Reading

What Is Happening To FINRA Arbitration

Posted in Arbitration, Intra-Industry Arbitrations

The SEC recently approved a FINRA proposal that will further restrict who can serve as “public” arbitrators. Under this new formulation, individuals who have worked in the securities industry and lawyers, including those who represent claimants, could not be considered “public” arbitrators for a period of time. The big change under this new rule, is… Continue Reading

Who Has Had A Problem With One Of Your Arbitrators

Posted in Arbitration, Intra-Industry Arbitrations

Anyone who has handled FINRA arbitrations, from the compliance officer to in-house counsel, you have probably had to deal with a problem arbitrator.  How many of you have had arbitrators sleep through the proceedings?  How many have had arbitrators who simply turn out to know absolutely nothing?  I suspect that the answers to these questions… Continue Reading

Tightening the Definition of ‘Public Arbitrator’

Posted in Arbitration, Public Customer Arbitrations

FINRA proposed amendments to the organization’s arbitration code would tighten the definition of “public” arbitrator for FINRA arbitration purposes. In a release, FINRA said the proposed rule changes would provide that a person who worked in the financial industry “for any duration” during his or her career would always be classified as a non-public arbitrators. … Continue Reading

FINRA Bans Settled CRD Expungements

Posted in Arbitration, Expungement, Public Customer Arbitrations

FINRA proposed a rule to bar brokers and their firms from requiring customers to consent to the removal of a dispute from the Central Registration Depository as a condition of settling the disagreement. In a release, FINRA said the proposal was intended to ensure that the CRD system continues to contain relevant information.  The proposal was… Continue Reading

Should You Feel Better That FINRA Vetted Its Arbitrators

Posted in Arbitration, FINRA Compliance, FINRA Enforcement, Intra-Industry Arbitrations, Public Customer Arbitrations, Raiding/Moving Firms

As a result of a couple high profile awards that were overturned because of issues with the arbitrators, FINRA has vetted its pool of arbitrators and has instituted new procedures to review arbitrators. Should you feel any better that this has happened? Having defended broker-dealers and registered representatives over 16 years, I have, at times,… Continue Reading

Expunge Me, No Expunge You

Posted in Arbitration, Broker-Dealer Regulation, Expungement, FINRA CRD

FINRA recently put into place the highly publicized prohibition of making a settlement contingent upon a registered representative having the subject arbitration expunged from the representatives U-4.  Is this a good thing?  The claimants’ bar thinks this is a good thing because it will prevent bad apples from having their records cleaned.  This position seems… Continue Reading

Court Remands Dispute Over Expungement of CRD Data

Posted in Arbitration, Expungement

The U.S. District Court for the Central District of California remanded to a California state court a stockbroker’s lawsuit against the Financial Industry Regulatory Authority for expungement of certain allegedly harmful disclosures from BrokerCheck. Doe v. Fin. Indus. Regulatory Auth., http://www.bloomberglaw.com/public/document/John_Doe_v_Financial_Industry_Regulatory_Authority_Inc_et_al_Dock. The court found no exclusive federal question jurisdiction over the plaintiff’s cause of action,… Continue Reading


Posted in Arbitration, Expungement

Expungement relief was granted in a very high percentage of arbitration cases filed by investors against broker-dealers, particularly those that were resolved by settlement or stipulated awards. FINRA panels granted expungement relief in 60.3 percent of arbitration cases, allowing broker-dealers to remove those customer claims from the records, from 2007 through May 2009.  More recently,… Continue Reading

Should You Even Care About A Uniform Fiduciary Duty

Posted in Arbitration, Broker-Dealer Regulation, Compliance and Supervision, Dodd-Frank, FINRA Compliance, SEC Compliance

In an Investment News article written by Mark Schoeff, he reported that the push for a uniform fiduciary standard for broker-dealers and investment advisors has become a bit stagnant. In fact, it was reported that the prospects for such a uniform rules have waned over the years notwithstanding the general consensus that there should be such a… Continue Reading


Posted in Arbitration, Punitive Damages

The Maryland Court of Special Appeals affirmed a FINRA arbitration panel’s punitive damages award against a financial adviser, who allegedly withheld from her clients information about a risky business venture.  See Gordon v. Lewis, http://www.mdcourts.gov/opinions/cosa/2013/1505s11.pdf. The court stated that defendant was a financial and investment adviser to plaintiffs, who were unsophisticated investors.  The plaintiffs filed… Continue Reading

Is This The End of Arbitration As We Know It

Posted in Arbitration, Securities Fraud

FINRA arbitrations may never be the same because FINRA recently proposed to redefine “public arbitrator” to exclude anyone from the financial industry from falling within that definition.  Couple that proposal with the existing ability of a claimant to select an all public panel and you have a totally new arbitration system.  What does this proposal… Continue Reading

Is This The Beginning Of The End To Expungment Agreements

Posted in Arbitration, Broker-Dealer Regulation, Expungement, Financial Industry Trends, FINRA CRD, Registered Representatives

A frequent tool for settlement was to make a stipulated award that included expungement of the registered representative’s U-4 a condition of settlement.  FINRA recently announced that it is “developing rule changes that would prohibit the practice of conditioning settlements on an investor’s agreement not to oppose expungement.” It should come as no shock that… Continue Reading

FINRA Deputy Counsel Article on Expungements

Posted in Arbitration, Expungement, FINRA CRD

A must read is the article in this quarter’ s The Neutral Corner, published by FINRA Dispute Resolution, and authored by John D. Nachmann, Esq., Deputy Chief Counsel, FINRA Registration and Disclosure.  Mr. Nachmann’s article, “Limitations on the Types of Disclosure Events That May Be Expunged From the Central Registration Depository Through Arbitration,” provides a blueprint… Continue Reading

Former AP of Defunct Firm May Enforce FINRA Arbitration Pact

Posted in Arbitration, Securities Litigation

The California Court of Appeals reversed a lower court’s refusal to compel a dissatisfied investor to arbitrate its dispute with a former associated person of a now defunct FINRA member firm.  See Ronay Family Limited Partnership v. Tweed, Cal. App., D062195, 5/23/13. A FINRA rule rendering a claim against a former member ineligible for arbitration… Continue Reading

Florida Limitations Law Applies to Arbitration Proceedings

Posted in Arbitration

The Florida Supreme Court concluded that the state’s statute of limitations governing civil actions or proceedings applies not just to judicial actions, but to arbitrations as well.  See Raymond James Financial Services Inc. v. Phillips, Fla., No. SC-2513, 5/16/13. The court said that the investors commenced arbitration proceedings in 2005, contending the broker-dealer’s branch office… Continue Reading


Posted in Arbitration, Securities Litigation

The Tennessee Supreme Court ruled that it has subject matter jurisdiction to review a trial court’s order vacating an arbitration award while remanding the dispute to a new arbitration panel without expressly declining to confirm the award.  See Morgan Keegan & Co., Inc. v. Smythe, Tenn. Sup. Ct., No. W2010-01339-SC-R11-CV, (4/25/13); http://op.bna.com/srlr.nsf/r?Open=jkoo-979qp7. The Court interpreted… Continue Reading