April 9, 2009
My practice is limited to representing claimants in FINRA arbitrations, mostly in Florida, but also across the United States. As a member of the Chairman roster of FINRA Dispute Resolution, and a former SEC Enforcement attorney, and having worked on Wall Street as far back as 42 years ago, I can add some perspective to the rule change requiring the reporting of alleged misconduct in statements of claim even where the individual associate is not named in the caption of an arbitration.
I have learned not to name associated persons in the caption for a number of reasons: (1) it means more lawyers against me (2) more opening statments and closing arguments against me, and rankings of arbitrators against me (3) naming an associated person invites the arbitrators to split the award, with some aginst the individual which probably will be uncollectible and (4) naming the individual allows him or her to remain in the room with the arbitrators for the entire hearing of 4-5 days or longer, allowing for undue familiarity with the panel to gain sympathy.
I have seen some very bad brokers, who harmed many people, but have "clean" CRD's because they are not named in the caption. This has acted to defraud the public. Imagine how angry a victimized senior citizen will become once he learns that his broker, who the cusotmer checked out with CRD, has been the source of many arbitrations for fraud and other misconduct, but CRD has no mention of it.
The existing system has been shameful, and is often used as an illustration of how incompetent the SEC and FINRA regulation have become. Whether a written complaint is a statement of claim, or a letter, it is a "complaint" about that broker's misconduct (with a statement of claim actually a more serious complaint). To artificially pretend that a statement of claim is not a written complaint is beyond specious, and enters the realm of aiding and abetting the defrauding of the public. Why would SEC and FINRA want to be on the side of the "bad guys" and conceal customer complaints? This rule change is not only needed, it is imperative, and may start to restore the credibility of the regulators who have been lapse recently in their judgment and oversight.
I applaud FINRA and SEC for finally "getting it".
Richard A. Stephens, Esq.
Boca Raton, FL