Ever since FINRA launched its recent focus on representatives' failure to update their U4 disclosures, we now often receive calls from registered representatives who have received a FINRA Enforcement letter inquiring about their alleged failure to file U4 forms on reportable events which took place in the past, sometimes years in the past, such as financial judgments, bankruptcies or ancient arrests or convictions. Unless handled properly such failure to report and the sanction could result in a complete Bar or suspension on one's license as well as a mark on one's CRD or BrokerCheck,
Most recently we represented someone who allegedly did not report judgments from years before, which appeared on their credit history. Fortunately, the representative determined to hire an experienced FINRA attorney from the beginning instead of making the critical mistake of handling it himself or even initially respond on his own before having an attorney experienced with FINRA on his side. As a result, after two months, the results spoke for themselves - FINRA simply issued a Letter of Caution which is not reportable on a Form U4 and not included in the CRD registry. No sanction was issued other than the letter of caution. The total legal fees for this client, based on an hourly retainer amounted to under $2,000 which attorney fees no doubt would have been a lot higher, and the results much worse, if he had contacted us after he had responded to FINRA on his own and we would have to work with whatever was in-artfully articulated previously.
Lesson learned - it doesn't pay to be penny wise and pound foolish when it comes to your career and license to earn an income. Contact and retain a FINRA Attorney early in the process.
Stuart D. Meissner Esq.
Nationwide Toll Free and Free Phone Consult
Today's NY Law Journal details how a lawyer can completely undercut their client's employment claims if they disregard or are unaware of clauses within the employer's severance agreement which apparently included a non-disparagement clause.
According to the Law Journal, Mr. Liddle chose to speak to the press about his clients' case, without any authorization to do so, and in so doing it is alleged it resulted in many of his clients losing their severance and bonus FINRA arbitration claims directly due to the violation of the non-disparagement clause in their agreements. Perhaps if he obtained his clients consent first (as we always do) in our opinion they could have at least reminded him of such clause, so as to have prevented such issue from happening just one month from the expiration of the clause. As noted in the article, the Appellate Division upheld the denial of a Motion to Dismiss the malpractice claim filed against Mr. Liddle and his firm.
While there are many good reasons as a FINRA Attorney to speak to the press regarding an ongoing FINRA arbitration and other matters, one obviously wants to be careful to not only be truthful so as to avoid any defamation claim, but to also make sure that no contractual obligations are being violated by doing so, impacting the underlying case. A lawyer is generally an agent for their client, so that the client is thus responsible for what the lawyer says as Mr. Little's clients apparently learned the hard way.
Malpractice Suit Over Lawyer's Newspaper Comments Proceeds
Ben Bedell, New York Law JournalFebruary 10, 2016
A client's assertion that his attorney's "eagerness to get his name in the papers" caused him to lose a $1.3 million case states a claim for legal malpractice, a Manhattan appeals court ruled Thursday.
Michael Barr, a securities industry executive, said Jeffrey Liddle, a founding partner of Liddle & Robinson, gave an interview to a newspaper that, according to Barr's former employer, breached Barr's agreement not to make any "disparaging statements" about the employer.
A unanimous panel of the Appellate Division, First Department, upheld Justice Manuel Mendez's April 2015 denial of Liddle's motion to dismiss in an unsigned opinion.
Barr was one of a group of 42 managers at Robertson Stephens, an investment bank that specialized in the software industry, who was laid off when the firm disbanded after the 2000 "dot-com bust." Liddle's firm was retained to prosecute the managers' severance and bonus claims in an arbitration proceeding.
Barr's employment agreement included a clause which said his severance package would be revoked if, within six months of his termination, he made "any public statement that is adverse, inimical or otherwise materially detrimental to the interests" of Robertson Stevens or FleetBoston bank, which had bought Robertson and then tried to sell it just prior to its dissolution.
A month before the clause would have expired, Liddle was quoted in The Wall Street Journal saying FleetBoston's "actions during the sale process drove down the value of the employees' stake in Robertson and damaged their reputations."
FleetBoston said the quote violated the no-disparagement clause and denied Barr's claims.
Read more: http://www.newyorklawjournal.com/printerfriendly/id=1202749141068#ixzz3zn3q5eCm
Brokerage Retaliation Against Whistle-blower - Fictional Customer Complaints - Fictional U5 Filings & Choosing a FINRA Employment Attorney
This month the NY Times reported on a former JP Morgan Chase broker Johnny Burris, a large producer for the firm who internally raised issues with JP Morgan for pressuring its sales people to promote their own proprietary mutual funds over other funds which were more suitable for his clients. He reportedly taped conversations and complained repeatedly to his supervises before he was suspended and the fired based on what he said was fictional allegations in a U5 filing of the catch all "failing to follow firm procedures" and allegedly improperly marking an order as unsolicited when it was solicited. Most of his clients were retirees who were unsophisticated about the financial markets.
Mr. Burris then took his evidence and recordings related to the sales pressure to the SEC and reported the same to the press , recordings and all made available to the public, and he apparently filed a claim of wrongful termination against JP Morgan Chase. What followed was what appears to be blatant retaliation by JP Morgan Chase in what appears to be a crusade to attempt to ruin Mr. Burris by incredibly instigating and even drafting at least two customer complaints against him so as to report such on his FINRA Broker Check and CRD system. By reporting three complaints, not only did such apparently negatively impact his pending wrongful discharge arbitration against JP Morgan Chase back in 2014, but such meant that he required heightened supervision with any new employer, making him toxic to many potential firms, even if his whistleblower status didn't already make him such. Adding insult to injury, the NY Times confirmed what appears to have been blatant perjury by his supervisor during the arbitration in denying that anyone at JP Morgan drafted any of the subject complaints and then later in response to the NY times this year JP Morgan admitted, contrary to such prior sworn testimony, that one of Mr. Burris' colleagues actually assisted clients "as a courtesy" in drafting the complaints. Clients that the Times spoke to denied that JP Morgan Chase even read back the complaints that JP Morgan drafted for them "as a supposed courtesy" and disputed the events, saying they signed the complaints without realizing what they said at the encouragement of the JP Morgan representative telling at least one that they "could get some money back" by signing (it appears JP Morgan then did provide about $8,000 to one of the clients without consulting Mr. Burrus as supposed compensation for a incorrect transaction and at the same time assisting themselves in defending against his wrongful termination claim). Although JP Morgan claims that the supervisor who denied that anyone at JP Morgan drafted the complaints, was unaware that such was in fact the case, nevertheless she apparently testified affirmatively (and turns out incorrectly) that no one at JP Morgan had done so. Which means she in effect testified that she knew for a fact what she was testifying to (which now they concede she did not) and if she did not know, as she clearly did not, she should have simply testified that she did not know, but instead chose to mislead the arbitration panel into thinking both that she knew all the facts and that she knew that no one at JP Morgan drafted the complaints, and such was thus false testimony. More troubling is that the JP Morgan representative who had contacted the clients, instigated and actually drafted the false complaints was on their witness list and was interviewed by JP Morgan's attorneys, but not surprisingly was never called to testify by them as it would appear that she would have contradicted their other witness who insisted no one at JP Morgan had drafted such complaints. To the extent the JP Morgan attorneys were aware of such information when the supervisor had testified it would appear they would have violated their ethical obligation not to solicit perjury and misleading a tribunal. However, this does not explain why Mr. Burris' own attorney did not call such JP Morgan witness on his own which he easily could have done, if he had contacted and spoken with the subject clients in preparing for the hearing to know of her existence and substantial relevance to the case.
ATTORNEY DROPPING THE BALL - DIFFERENCE BETWEEN HAVING A "BEN CARSON" TYPE OF ATTORNEY AND A "CHRIS CHRISTIE" TYPE OF ATTORNEY
According to the update to the NY Times Story Mr. Burris' lawyer told him not to talk to the subject clients during the proceeding which he apparently lost probably because of those very complaints which turned out to be fictional and created by JP Morgan contrary to their testimony. We assume then that the lawyer himself did not bother to speak to the subject clients which boggles the mind as to why. According to the story two of the complaints had the exact same typefaces and appeared to come from the same printer. As such, why the attorney himself did not bother to reach out and interview these clients as potential witnesses and possibly call them as witnesses to contradict what JP Morgan presented is unknown, but appears to be a dropping of the ball, big time. In our opinion such could have made all the difference to Mr. Burris as it would appear such FINRA arbitration and the damages he could obtain from the proceeding was critical to his financial future. According to the article Mr. Burris, after he lost his arbitration, had later obtained, on his own, sworn affidavits from both clients he spoke with, which in itself could have been very very helpful in cross examining JP Morgan's witness. In our view such could have not only resulted in a large award in his favor, but significant punitive damages as well, in his FINRA arbitration, instead of the big fat zero he received.
Apparently, now unemployed and having difficulty finding any employment, Mr. Burris has filed a compliant with FINRA Enforcement and the SEC Whistle-blower Office for retaliation. Frankly, if this is not retaliation then there is no such thing as retaliation. We will be following what if anything FINRA and the SEC Whistle-blower office does with these unfortunate actions taken by licensed representatives at one of the largest financial institutions in the country, but on the surface what took place is outrageous and without severe ramifications the very wrong message will be sent to the industry and to whistle-blowers across the country. Based on the facts, not only should the employees involved in both the creation of the false complaints and the presentation of false testimony lose their licenses, but criminal charges should seriously be considered including perjury and falsification of business records (one of the false complaints were maintained in JP Morgan records). In addition, the SEC should take enforcement action against JP Morgan Chase for retaliation against an SEC whistle-blower and seek a large multi-million dollar fine for their actions (in addition to the underlying whistle-blower matter). In addition, it would appear that the attorneys for JP Morgan could be subject to a Bar disciplinary complaint in presenting testimony which they may have known to have been false.
Just this week the SEC announced it settled an enforcement action against JP Morgan Chase for inadequate disclosures related to the sale of their products for a possible a humongous 307 million dollar fine. If Mr. Burris is deemed an SEC whistle-blower who provided original information which led to such settlement he could be in for a large payday of 10-30% of the settlement and would obviously have the last laugh (although based on press reports it appears he may not be alone in relation to having provided information leading to such action, so the reward may be divided). Only time will tell as our own select whistle-blower clients can attest to. Unfortunately, none of this is in the control of Mr. Burris. The one proceeding that Mr. Burris had control over was his FINRA arbitration claim for wrongful discharge and retaliation and it would appear his attorney failed him in not doing proper due diligence in preparing for the hearing, speaking to critical witnesses, obtaining affidavits locking such witnesses in, calling them to testify and properly cross examining JP Morgan witnesses. As a former prosecutor, we were always trained that one must always question, explore and follow up with any suspicious evidence presented by any firm in any arbitration proceeding and not simply accept such on face value. Just as when another large Wall Street firm, Morgan Stanley, presented falsified computerized notes to us in another FINRA arbitration, which notes looked too good to be true for them, we carefully went about proving they were falsified, and obtained an order for a forensic examination of Morgan Stanley computers, all resulting in their admitting to such falsification by the broker, the subject broker being discharged, and a satisfied client. At this point it would seem that Mr. Burris still could consider filing another arbitration against the individuals involved in the manufactured complaints and the false testimony presented which likely impacted his lost hearing, and if he does, we hope he chooses his counsel more wisely.
This case is a perfect example of why the selection of an attorney in any matter involving one's entire future career is essential and it is not the time to be penny wise and pound foolish.
Stuart D. Meissner Esq,
Free Phone Consult - 212-764-3100
So after years of being at a firm you decide to seek out the next big sign on bonus check and seek out a new firm to do it. However, besides having access to your own clients who you brought to your current firm or even clients you developed at your current firm, you realize you have access to hundreds of other client records all with a net worth of over 1 million dollars with hundreds with over a 1 billion in invested assets. Clearly such records would be a gold mine for another firm, so you consider using such access as a method to parlay that into a much larger sign on bonus at a new firm. Generally, this is a very bad idea and would likely get you sued by your current employer for violating confidentiality agreements, violating trade secret prohibitions, unfair competition, potential breach of non-compete agreements you may have originally have signed, a breach of your duty of loyalty and other causes of action. This is not a hypothetical, but rather according to the NJ Law Journal of June 18, 2015 a real world legal action filed just last month by Fidelity in the Federal District Court of New Jersey against a former Fidelity financial advisor who went to Wells Fargo and allegedly utilized such to parlay it into a 1 million dollar upfront bonus from Wells Fargo. Fidelity is seeking an injunction from the Court to stop the solicitation of the subject clients and an order compelling arbitration of the dispute before a panel of the Financial Industry Regulatory Authority (FINRA) which presumably would seek substantial damages. According to the NJLJ the law suit alleged:
"In a three-month period before he resigned, Carson used Fidelity's computer system to look up data on hundreds of customers, with most of the searches conducted after 6 p.m., the suit said."
If true it does not look good for this former Fidelity Rep. Every rep should know in this day and age, everything one does on a computer system is monitored and will catch up to you sooner or later. In our view, considering the legal action, although it is unclear how much Wells Fargo knew about what this representative was doing in bringing over his supposed clientele, it was not worth the 1 million they paid him upfront, and if so we wonder how many days this representative will last at Wells Fargo before being dumped along with a new FINRA claim by Well Fargo seeking reimbursement of the 1 million sign on bonus, forgivable loan that now could never be repaid.
If one is switching from one firm to another, the first order of business is to learn if both the firm you are leaving from and the one you are joining are signers to the Brokerage Protocol which provides a safe harbor for broker who abide by such guidelines to not be sued for most if not all of the issues raised above. It does not cover "raiding" which involves much more than one advisor going from one firm to another, and a claim we successfully fought against Oppenheimer & Co. years ago in defending another firm and branch manager who left them, as they have a history of filings such frivolous claims in our opinion, so as to intimidate potential departing employees. Hundreds of firms are signatories to the Protocol. However, if only the firm you are departing from is a signatory to the Protocol and you follow the protocol, there is an argument that they are bound by it even though the other firm did not sign, but the arbitrators will be the ultimate determiner of such. If you are unsure as to whether the firm you are joining or leaving is a member of the Protocol you may submit the below request button to our firm so as to inquire for free. Either way, if transitioning from one firm to another, whether or not a protocol member, it is a good idea to retain experienced FINRA lawyer to advise you on how to do it safely with the least likelihood of any legal action which will cost one a lot more than pro-actively retaining an experienced FINRA attorney in advance. Long ago before starting my own practice focusing on individuals, while working for boutique securities law firm, I was personally contracted by Morgan Stanley to solely represent many Morgan Stanley brokers just for their transition to the firm, while the firm had its own counsel. Such experience only reinforced many of the pitfalls representatives can fall into if they do not have the advice of a qualified FINRA Attorney from the beginning of considering any sort of employment transition.
Stuart D. Meissner Esq,
Free Phone Consult - 212-764-3100
Wrongfully Discharged ? The Nightmare Scenario. What every “At Will” Employee in the Securities Industry Needs to Know
As an experienced nationwide FINRA Employment Arbitration law firm, we receive many calls from employees across the country, in the securities industry who have been terminated and wish to file a FINRA arbitration claim for wrongful termination. Often times the client asserts that they were wrongfully terminated due to something which they did not agree with or correctly believe the reasoning behind the discharge was improper or unfair for various reasons. While most brokers, financial advisors, registered representatives, financial consultants, etc who are employed in the securities industry are “at will” employees, meaning they are employed without an employment contract, such does not always prevent a legal action or a FINRA arbitration claim. While one may have been given forgivable promissory notes and have been provided front end bonuses, so as to try to keep them at the firm for many years, such typically make clear that the notes are not employment contracts and do not guarantee a length of employment. In fact, most notes mandate that the employee reimburse the firm for any portion of the upfront payments made which were not forgiven, which most representatives only learn, upon changing or leaving firms earlier than expected and then having to retain counsel to try to negotiate a reduction and/or a payment plan.
While most employees are considered “at will” by the firm, which means, barring any discriminatory reason (age, race, gender, sexual preference, disability, whistleblower) which always allows for a wrongful discharge claim if such can be proven, the employee may be dismissed at the whim of their employer, just as the employee can leave at their whim. However, depending on the State you work in, the “at will” status may be limited in many ways, opening up the possibility of a discharged employee to file a wrongful discharge claim against the firm seeking back wages, future wages, potential punitive damages, costs and at times even attorney fees, all of which could save a career.
Examples of situations where “at will” employees may in fact file a wrongful discharge claim based on the fact that the reason provided for their discharge was either false, the result of a faulty internal investigation, the result of incorrect assumptions, or even the result of minor violations of Codes of Conduct which should not result in termination, etc, run the gambit. Many of these situations overlap with faulty U-5 Filings and defamation of the employee, with possible FINRA Enforcement investigations then being triggered, possibly ruining a representative’s career literally over night. Adding insult to injury the firm then seeks reimbursement for the upfront funds provided to the rep, at a time when the rep is now unemployed with his/her record improperly tarnished and under FINRA investigation. This is the Nightmare Scenario that is happening more and more.
STATEMENTS FROM SUPERVISOR – In 38 states, informal or formal statements from a supervisor or officer, without any disclaimer, can create an implied contract. For example a supervisor may state in writing (email or otherwise) or orally that as long as a representative does his job right he will always have his job. Such may have altered an “at will” employment to a just cause employment, as long as such belief by the employee would be reasonable, requiring the firm to then show just cause for the basis for any future discharge.
EMPLOYEE HANDBOOK AND CODE OF CONDUCT STATEMENTS - similar to Statements, Handbooks and Code of Conducts can similarly create implied contracts in the same 38 states. At times the Employee Handbook or Code of Conduct may have statements referring to the manner in which the firm will treat its employees which could allow for a FINRA arbitration claim for wrongful discharge by a representative, not withstanding the “at will” nature of the relationship. For example, according to the recent successful wrongful discharge claim against Citigroup Global Markets, a June 2015 FINRA arbitration Panel held that its Code of Conduct contained a section called “Fair Treatment” which states in part “Citi is committed to dealing fairly with is clients, suppliers, competitors and employees.” Other Employee Handbooks may state that employees will only be terminated for “just cause.” Such clauses opened up Citigroup to wrongful discharge claims by employees, as a recent arbitration did in holding them liable for over $400,000 in damages for a wrongfully discharged Branch Manager for Citigroup related to what was a minor alleged breach of confidentiality which in itself was questionable as the client provided consent. Such provisions within the Code of Conduct allows for an analysis by an arbitration panel of exactly why a discharge took place, the lack of investigation conducted before the discharge, and even whether the discharge was appropriate compared to other greater transgressions by other Citigroup employees in the past and the lack of dismissal of those employees. However, a large caveat to such claims is that in 22 of the 38 states that allow for such implied contracts, if the employer includes a prominent and unambiguous disclaimer that anything stated within such Manuals or Code of Conduct does not create contractual obligations, then there would be no implied contractual obligations or alteration of the employment at will.
PUBLIC POLICY EXCEPTIONS – All states with the exception of 8, recognize a public policy exception to the “at will” doctrine. Meaning in most states, an employer cannot discharge an employee if the reason for the discharge would be against public policy. Examples include, refusing to break the law or being discharged for filing a workman’s compensation claim. In the securities industry this may arise when an employee refuses to cooperate with their employer, with regard to providing false information to FINRA or other regulators conducting an audit or investigation. Such exception is very fact dependent and is impacted by the state one is employed in and as such an experienced FINRA employment arbitration attorney should be consulted.
GOOD FAITH AND FAIR DEALING REQUIREMENT - Only 11 states, including California and Massachusetts, recognize this as implied in EVERY employment relationship. As a result every employer personnel decision is subject to a “just cause” standard and terminations made in bad faith or malice are prohibited.
At the end of the day there are several possible avenues that employees may explore if they believe they were wrongfully discharged or forced to leave (constructive discharge). In addition, to the above, such often also leads to the intentional infliction of emotional distress and possible defamation claims. As dismissals can have a lasting impact upon one’s career especially in the securities industry, it behooves all securities employees to consult with a qualified FINRA employment attorney, who is experienced in taking on large and small firms, about their particular situation as soon as possible. As many wronged employees have found with FINRA arbitration claims, "if you take on a Goliath, sometimes you in fact can and do win like a David".
By: Stuart D. Meissner Esq.
"when you are a David, that needs to take on a Goliath"
or nationwide toll free 866-764-3100 Free Phone Consult
Published Reports indicate that the Obama Labor Department is intent on limiting the definition of "white collar" (which is exempt from overtime) to categories which would include executive, administrative, and professionals from currently those that at most earn $455 per week, that is $23,660.00 per year, to now to those that earn at least $970 per week or $50,444.00 per year. Such change can bring in an entire new category of advisors who previously would not have been entitled to over-time. Firms such as LPL Financial who in our opinion would have to give great consideration as to who they refer to as employees vs. independent contractors, and may need to somehow reduce many brokers to part-time positions, so as to avoid having to pay time and a half overtime. We expect firms such as LPL and others to fight these provisions but time will tell.
The Notice of Proposed Rulemaking published by the Labor Department on July 6, 2015, in the Federal Register invited all interested parties to submit written comments on the proposed rule by September 4, 2015. After reviewing and considering all the comments, the Labor Department will determine the final language of the rule next year.
Stuart Meissner Esq.
As noted in a recent Investment News Article where several Morgan Stanley brokers are being sued by JP Morgan Chase for allegedly defaming their prior employ JP Morgan Chase, one must be careful as to what one says to potential clients about one's prior firm, as whatever it is in must be accurate. Truth is an absolute defense to a defamation claim. Departing reps must balance risk (potential in being sued) vs. reward (obtaining clients) when deciding whether to say anything about your former firm to clients, even if true. Protocol should be followed in transitioning.
Absent a non-disparagement agreement, there is no basis for a firm to sue a former repr for saying negative things about the former firm, as long as it is accurate. However, if false a statement asserted as fact, could be considered defamatory and such action can be pursued.
The lesson learned is think long and hard about what you will say and wont say in contacting your former clients in trying to have them switch firms. Make sure you have backup for anything you do say and to the extent possible, keep it in the form of your opinion, as opinions cannot be defamatory. If you are considering switching firms it is highly recommended that you retain your own counsel so as to guide you through the transition, and not rely on counsel of the new firm whose interest is for the firm, not you.
Word for the wise.
Stuart D. Meissner Esq.
Toll Free 866-764-3100
This week's WSJ stated that FINRA is on tear mandating that firms make sure that their reps are up to date on their disclosure filings with FINRA. Specifically representatives and firms must make sure all bankruptcies and financial disclosures such as judgements have been reported, as well as reportable criminal convictions, even if from college days.
As a result of this FINRA proctology exam many reps are being reminded of long forgotten events they sooner would like to forget. However, apparently FINRA is very sloppy in its research mistaking reps for others who have similar or the same names and other errors.
Depending on the type of disclosure representatives must remember that disclosure can have a drastic impact on a representatives ability to gain future employment, let alone clients, so it is prudent to make sure that only accurate disclosures are placed on their records.
In 2010 FINRA issued a release which among other things allowed for :
Brokers will be able to submit a written notice of the dispute to FINRA – FINRA will post the appropriate form on its website – with all available supporting documentation. If FINRA determines that the dispute is eligible for investigation, it will add a general notation to the broker's BrokerCheck report stating that the broker is disputing certain information in the report – and that notation will only be removed when FINRA has resolved the dispute. If its investigation shows the information is in fact inaccurate, FINRA will update, modify or remove that information as appropriate.
As a result, ever since 2010 representatives have had two alternatives to correcting disclosures that appeared on BrokerCheck. As has always been the case, brokers could bring an arbitration claim in FINRA against the firm which made the filing and pursue an arbitration for "reformation" of their CRD ordering the firm to make a correction. However this process, the pursuit of which is controlled by the broker, can take many months and as a result can be expensive like all arbitrations. FINRA's alternative method provided for in 2010, allows for FINRA to investigate and make changes on their own, reducing the potential expense and allowing counsel for the broker, such as my firm, to represent reps for such submissions and follow-up based on an affordable flat fee basis. However, since the representative does not control the process, one is at the whim of FINRA Enforcement to investigate and make any changes. One can certainly try both routes; see if FINRA will make the changes first, limiting the expense, and if not, pursue arbitration, but either way the representative will need to weigh the likelihood of success (how accurate is the current information and can it be proven to be inaccurate) along with the expense, vs. leaving an incorrect black mark on one's record for their entire career.
Stuart D. Meissner Esq.
As reported in USA Today, FINRA has announced that it is increasing its fines and sanctions on brokers and brokerage firms. Fines will be attached to the Consumer Price Index increases. As a results some sanctions will immediately increase almost 50%. Other changes include:
• Upping suspensions for brokers who misrepresent themselves to customers to between 31 days and two years, up from a previous range of up to 30 days.
• Increasing suspensions for brokers who violate FINRA's suitability rules to up to two years from a previous range of up to one year's suspension. Brokers are required to base their investment advice on a client's risk tolerance and investment experience, also known as the client's suitability to any given investment.
• FINRA will start to advise its adjudicators, or judges in its enforcement cases, "to strongly consider" barring brokers for egregious misconduct, such as when a broker commits "intentional or reckless fraud" or commits serial violations. Currently, FINRA asks only that adjudicators "consider" barring brokers who have committed fraud or who are repeat offenders.
• FINRA will also start to advise its judges to "strongly consider" expelling firms that have engaged in egregious misconduct.
It appears FINRA is attempting to crack down on brokers with numerous complaints to avoid another Mark Hotton situation who was with Oppenheimer and eventually went to jail for 34 months only after he had 12 FINRA complaints.
Stuart D. Meissner Esq.
This week's WSJ Risk and Compliance Journal demonstrates why compliance employees need their own retained counsel when it comes to FINRA investigations. When Brown Brother's Harriman was investigated by FINRA enforcement, Brown Brother's money laundering procedures were under scrutiny, specifically with regard to penny stocks and using such stocks for money laundering activity. While both the firm and the compliance officer Hal Crawford were fined and sanctioned for not creating a proper anti-money laundering program in relation to such trading, it is not known if Mr. Crawford was provided with the resources to implement such program or if the firm was willing to accept and implement Mr. Crawford's suggestions. These issues would be obvious issues that Mr. Crawford's attorney would want to raise if they were issues, so as to protect Mr. Crawford's reputation and future in the industry. However, if he was represented by counsel hired by Brown Brothers it would be unlikely that such attorney would focus on such issues as that counsel would clearly be conflicted.
This highlights once again the need for individual employees to retain their own counsel in any FINRA enforcement investigation and to defer accepting any counsel that the firm provides to such employee. As the old saying goes, there is no such thing as a free lunch and in the case of FINRA investigations it could be a very very expensive lunch in the long run. While we have no idea if Mr. Crawford's situation involved such issues, based on the facts it would appear that these issues potentially could play a role and is instructive for others similarly situated.
Stuart D. Meissner Esq.
Stuart D. Meissner Esq. is an experienced FINRA attorney who has practiced law for over 27 years, including as a FINRA Attorney, Securities Regulator and Prosecutor.
Disclaimer: Prior results cannot and do not guarantee or predict a similar outcome with respect to any future matter, including yours, in which a lawyer or law firm may be retained. The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.