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Category Archives: Public Customer Arbitrations

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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

YOU NEED TO BE AN INVESTOR FOR FINRA ARBITRATION

Posted in Outside Business Activities, Public Customer Arbitrations

An allegedly defrauded investor may not compel a broker-dealer to arbitrate claims over his allegedly unsuitable investments.  See Berthel Fisher & Co. Financial Services Inc. v. Frandino, D. Ariz., No. DV-12-02165-PHX-NVW, 5/14/13, http://www.bloomberglaw.com/public/document/Berthel_Fisher_Company_Financial_Services_Incorporated_v_Frandin.  The investor was not a “customer” of the firm’s registered representative for purposes of the FINRA arbitration code since the registered representative… Continue Reading

Did You Know That FINRA Arbitrations Just Got More Expensive

Posted in Arbitration, Intra-Industry Arbitrations, Public Customer Arbitrations, Securities Litigation

Both the industry and customers liked FINRA arbitration because it was a relatively cost effective dispute resolution forum.  With FINRA Notice to Members 13-21 and effectively doing away with having an industry person on the panel, FINRA has just made arbitration more expensive for everyone. Without any industry presence on the panel, both customers and… Continue Reading

So Do You Really Want To Arbitrate Customer Claims

Posted in Arbitration, Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA Enforcement, Public Customer Arbitrations, Securities Litigation

In the 17 plus years of defending broker-dealers in FINRA arbitrations, I and my clients have relied upon the fact that at least one arbitrator would have industry experience.  In my experience, having that presence did not create an unfair advantage for the firm.  Instead, it provided the panel with a knowledgeable resource that would… Continue Reading

So is it now really the beginning of the end of arbitration

Posted in Broker-Dealer Regulation, Dodd-Frank, Financial Industry Trends, Public Customer Arbitrations

The North American Securities Administrators Association on behalf of state securities regulators, following 37 members of Congress, recently asked the SEC to exercise its authority under Dodd-Frank and do away with mandatory arbitration agreements.  Consumer groups have also jumped into this fray. Does this signal the beginning of the end of arbitration clauses in customer… Continue Reading

Do You Want To Know One Of The Greatest Risks To Your Practice

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

In the years that I have defended broker-dealers and investment advisors from customer-initiated complaints, a common theme has emerged.  The bulk of the complaints seem to come from older clients.  Unfortunately, the aging baby boomers may exacerbate this issue. In a recent Investment News article by Mary Beth Franklin, she reported on a recent study reflecting… Continue Reading

Do You Really Think Class Actions Are A Thing Of The Past

Posted in Arbitration, Broker-Dealer Regulation, FINRA Enforcement, Public Customer Arbitrations, Securities Class Actions

The prudent answer to this question should be probably not, but we can hold out hope. A FINRA panel recently upheld a class action exclusion in a broker-dealer agreement to arbitrate contained in its customer agreement.  In other words, the provision prohibits a customer from seeking class action status against the broker-dealer, forcing all customer complaints… Continue Reading

Oh, Happy Days!! Non-Parties in FINRA Arbs May See Relief

Posted in Arbitration, Intra-Industry Arbitrations, Public Customer Arbitrations

The SEC agreed to a proposed change to the Financial Industry Regulatory Authority’s arbitration rules relating to subpoenas and orders directed towards non-party FINRA members and their associated persons.  See Release No. 34-68404; File No. SR-FINRA-2012-041 (December 11, 2012), and http://www.finra.org/Industry/Regulation/RuleFilings/2012/P158171.  These new rules will allow FINRA arbitrators to issue orders for the appearance of witnesses and… Continue Reading

Arbitration Is Still the King for Resolving Securities Disputes

Posted in Arbitration, Intra-Industry Arbitrations, Public Customer Arbitrations

Both federal and state courts are exceedingly reluctant to halt securities arbitrations.   As an example, a California federal court refused to issue a temporary restraining order stopping a securities customer arbitration.  In fact, the court was somewhat perturbed at even being bothered, indicating that TROs were “for emergencies only.”  See Stanchart Securities International Inc. v. Galvadon,… Continue Reading

Even Unconfirmed, Securities Arbitration Awards Bar Recovery

Posted in Arbitration, Intra-Industry Arbitrations, Public Customer Arbitrations

The Arkansas Court of Appeals approved the dismissal of complaint filed by securities investors because an arbitration award had resulted in other investors losing the same case.  See Elsner v. Kalos Financial Services Inc., Ark. App., No. CA 12-403, 11/7/12, and http://judicialview.com/State-Cases/arkansas/Civil_Procedure/Elsner-v-Kalos-Financial-Services-Inc./10/566455. The court refused to put much stock in the argument that an unconfirmed arbitration… Continue Reading

You Should be Concerned With Expanding BrokerCheck

Posted in Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, Investment Adviser Regulation, Public Customer Arbitrations, Registered Representatives

FINRA announced that it is seeking proposed rule changes to make it easier for investors to use BrokerCheck.  See http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/. These proposed amendments to FINRA Rule 2267, Investor Education and Protection, would require member firms to include a BrokerCheck reference on their websites and those of any associated person.  Additionally, FINRA Rule 8312, BrokerCheck Disclosure,… Continue Reading

Is this FINRA’s First Play for RIA Oversight? Opening FINRA Arbitration to RIAs

Posted in Arbitration, Intra-Industry Arbitrations, Investment Adviser Regulation, Public Customer Arbitrations

FINRA is now permitting RIAs to participate in its arbitration process.  The details will be forthcoming. Traditionally, FINRA arbitrations were for broker-dealers to resolve their disputes.  This is a significant opening for FINRA.  Nonetheless, FINRA claims it is ready for RIA cases if the parties agree.  Further, there are differences in standards under federal law for both. … Continue Reading

Do You Want To Know A Secret About Account Opening Documents.

Posted in Broker-Dealer Regulation, Internal Investigations, Public Customer Arbitrations, Registered Representatives

Never, under any circumstances, should you have your client sign an account opening document in blank, for you to complete at some later time.  To most of you, this is not much of a secret, but I have seen it enough in my practice of defending brokers to know that it happens all too often…. Continue Reading

Who Wants To Learn A Way To Insulate Themselves From Liability.

Posted in Arbitration, Compliance and Supervision, Corporate Governance, Internal Investigations, Public Customer Arbitrations, Registered Representatives

In our hyper-fast world, financial advisors, like many in the service sector, have become lazy.  Let me be clear, I think financial advisors are working harder than ever to service their clients in these challenging times for which they should be commended. The laziness to which I refer is that I see financial advisors taking… Continue Reading

Who Wants To Know Some Secrets About Dealing With Customer Complaints.

Posted in Compliance and Supervision, Public Customer Arbitrations, Registered Representatives

In a prior post, I discussed the traps that people fall into when it comes to email.  One of the areas of greatest concern for me when I defend brokers and investment advisors are the emails that are generated immediately after a complaint (particularly an informal one) is received. It goes without question that the… Continue Reading

Avoid Being FINRA’s Poster-Child For An Enhanced BrokerCheck

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

FINRA has filed with the SEC proposed rule changes that are intended to facilitate greater consumer access to BrokerCheck.  Assuming that these proposals become reality, you better take a fresh look at your risk avoidance and know your customer models because, with greater access to information, consumers will likely use BrokerCheck as their primary resource… Continue Reading

If You Are Lucky, A Bee Sting Will Only Be A Bee Sting

Posted in Arbitration, Financial Industry Trends, FINRA Compliance, Public Customer Arbitrations, Securities Litigation

A few years ago, I defended a financial advisor over a bee sting.  The customer wanted to take the cash value out of a life insurance policy to buy a second home.  The advisor cautioned against doing so before completing underwriting on a new policy.  The customer ignored this advice, contacted the company directly, and… Continue Reading

Do FINRA Arbitrations Really Benefit The Industry?

Posted in Arbitration, Public Customer Arbitrations

There is a general sentiment that arbitrations favor the defense.  In fact, several years ago, there were several House and Senate bills supported by the trial lawyers that sought to amend the Federal Arbitration Act to end “forced” arbitrations.  In my experience, however, FINRA arbitrations may actually be making it easier for claimants to file… Continue Reading

How Can You Determine If You Have A Reasonable Basis For An Investment Recommendation?

Posted in Broker-Dealer Regulation, Financial Industry Trends, FINRA Compliance, Public Customer Arbitrations, Securities Litigation

It has been two months since FINRA Rule 2111 has come into effect.  This new rule requires that there must be a reasonable basis to believe that the recommended transaction or investment strategy involving a security is suitable for a customer, where a strategy can involved the recommendation to buy, sell or hold a security. … Continue Reading

My Client Was Illiterate, But Were Covered Calls Suitable?

Posted in Arbitration, Public Customer Arbitrations, Securities Litigation

This question confronted a registered representative that we defended.  Unfortunately, he did not ask himself that question until the middle of trial.  You see, the registered representative never knew his six grade educated, retired doorman client could not read when he sold him a covered call investment strategy. How can something so basic be missed? … Continue Reading

FINRA Proposes Rule Changes Relating To Subpoenas In Customer And Industry Disputes

Posted in Intra-Industry Arbitrations, Public Customer Arbitrations

On August 24, 2012, FINRA filed a proposed rule change with the SEC relating to when industry parties seek the appearance of witnesses or the production of documents from FINRA members and individuals associated with the members.  The new rules would require arbitrators, unless the circumstances dictate otherwise, to issue an order directing the production… Continue Reading

Arbitration in the 21st Century

Posted in Arbitration, Intra-Industry Arbitrations, Public Customer Arbitrations, Securities Litigation

We have previously blogged on changes in the arbitration process.  We have seen that commercial arbitration, and, in particular, the securities arbitration process, is undergoing a transformation. The backdrop for these changes is related to the belief that many consider the increased cost in arbitration to be the of the Americanization of the process.  That means, a higher cost for… Continue Reading