Amazing Chutzpah – Securities America asks reps to “pinky swear” reports InvestmentNews

So when is a contract not a contract? Or is it a contract? In a bizarre move, Securities America has asked its representatives to sign pledges of loyalty to the firm. The real question in my mind is this – which has more legal validity, the loyalty letter or a “pinky swear”? Perhaps they’re the legal equivalent.

Investment News reports that a letter went out to the sales force and is essentially asking for a pledge to stay. What happens to those brokers who don’t sign? What happens to supervisors whose brokers don’t sign? If a broker leaves, will Securities America pursue him/her for breach of a “pinky swear”?

Who came up with this idea? What will happen if these scenarios occur? 1) a broker is fired for not signing the pinky swear or 2) a broker claims breach of contract because they signed the pinky swear and was later fired for other than compliance reasons. Hmmmm. This won’t keep me up at night, but I’m thinking that this was a retail-side idea and not vetted by lawyers.

That’s the under-90 degree view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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Wall Street Never Learns

When I was a young punk, just a few years out of New York Law School, Janney Montgomery Scott fired an analyst named Marvin Roffman. What offense did Mr. Roffman commit? None, said Janney.

Mr. Roffman disagreed. He said he was fired because he said negative things about the Trump Taj Mahal project, in particular its bonds. He said that the Trump Organization threatened Janney and that he was fired as a result of higher-level corporate interaction. He filed an arbitration and, in one of those rare perfect coincidences, the Taj Mahal filed for bankruptcy just before the arbitration. This was 20 years ago, but I think it was the week that the arbitration was supposed to start.

I remember calling the lawyer representing Mr. Roffman, Scott Vernick, and encouraging him, telling him that his case got a whole lot better. Mr. Roffman, I am sure, was able to testify that he not only was fired for giving his opinion, but that he was right in having the opinion. He was awarded $750,000.

Fast forward to today. An article by Jesse Eisinger in the New York Times Dealbook blog describes the treatment of David Maris by Bank of America. The article describes how Maris opined that a company’s financial statements were unreliable and that shareholders should sell.

Guess what? He was fired. According to BofA, he was not fired because of his sell opinion, but for other reasons. Right. Just because BofA is in Charlotte, doesn’t mean they’re not trying to sell the Brooklyn Bridge.

By the way, Maris turned out to be right. The company settled with the SEC due to inaccurate financial statements. Looks like another arbitration where an analyst will say “I was right and they fired me for it.”

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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Aaron Rents computers, and spies on its customers?

I found this shocking. Aaron Rents, a leading renter of furniture, computers and office stuff, is involved in controversy related to computers it rents. Similar to a controversy last year, where a school district in Pennsylvania was turning on laptop webcams remotely, Aaron’s was apparently doing something similar.

Here’s a new twist, I think. At least one article I read stated that the remote capability was hardwired into the computer. This means that a user would probably not even be able to tell that the computer could spy on him or her. It supposedly could be deactivated with a wand.

This raises all kinds of issues, in my humble opinion. Would this be a violation of the Florida Unfair and Deceptive Trade Practices Act? Does it constitute an invasion of privacy. What Federal laws might have been violated? What other Florida state laws might have been violated? These are all interesting questions that will ultimately get sorted out.

But in the meantime, I remain amazed once again. That’s all from this Lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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I’m on Jury Duty

I feel ambivalent about this. I will certainly lose productivity as a result, but why should lawyers be exempt. It’s an inconvenience, for sure, but isn’t it better to have a true cross-section than to limit it only to those people who are unable to figure out a way to get ouit of it?

Trial by jury is a fundamental right. I’ve served on one jury before, a criminal trial in New Jersey. I’m not sure it’s a smart idea to have a lawyer on the jury, but it may be useful to have a legal mind around.

We’ll see.

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Chase Investment Services loses arbitration to Morgan Keegan

This is fun to talk about, because my firm (in the form of yours truly) represented Morgan Keegan. The firm was named in an arbitration by Chase Investment Services, Inc. because a former Washington Mutual investment representative left the firm just before Chase Investments and WaMu Investments merged in May 2009. Chase thought he shouldn’t have contacted his customers.

Chase filed for an injunction and an arbitration. The final FINRA arbitration hearing took place in early March. The result was a complete victory for Morgan Keegan and the broker, Todd Rozzo. In fact, Rozzo was awarded $50,000 in damages for a wrongful injunction and custody of notebooks he had created while at WaMu. Kudos to my co-counsel, Chuck Dalziel and Stuart Sims, from Brock, Clay in Marietta, Georgia. These guys were a lot of fun to work with, and Chuck and I go waaaay back.

One part that was particularly fun was that I got to refer to one of my favorite television commercials. It’s called Washington Mutual “head scan”.

Just remember the phrase – “I hate it when these things don’t scan.”

You might recognize Jane Lynch from Glee and Tim DeKay from White Collar.

That’s the joyous view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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Securities America wants it both ways with Federal injunction strategy.

I am outraged. It’s no secret that I’m not a big fan of Securities America, the hapless offspring of American Express Financial Services (now Ameriprise). In fact, I’m kind of embarrassed that I own Ameriprise stock, if for the only reason that it owns Securities America. There may be other reasons, but I haven’t looked at the company that closely lately.

Those of you who know me will recall that, with my then-partner, my law firm obtained an arbitration award against Securities America for $5.4 million several years ago. In that case, the firm tried to assert, with a straight face, that a broker using a stolen identity was properly registered. The arbitrators disagreed.

This time around we have Medical Capital Holdings and Provident Royalties. Both of these companies turned out to be frauds and Securities America was a huge seller of these two products. The one at issue in the Federal case is MedCap.

Securities America is desperate. Even though the company is owned by a huge financial services company, it is claiming that there is not enough money in the pot to fund a class action settlement and pay potential arbitration claims. So the company asked a judge to stop the arbitrations and now is asking the same judge to stop state regulators. (See Suzanne Barlyn’s article here.) Huh?

I was outraged when the judge halted the arbitrations. To me it was the height of hypocrisy to tell clients that they must participate in a class action. Yet Securities America would not allow a class action arbitration I am certain. Further, if a client brought an individual action against the company in court, it’s first reaction would likely be a motion to compel arbitration of the claims. Then they would ask a class-action judge to stop the arbitration? How is that fair or logical.

Pick your venue, boys. Class action or arbitration. But you don’t get the choice of stopping an arbitration (or regulator) in favor of the class action. If you don’t have the money, then file for bankruptcy and let everyone pick over the carcass. I’m betting there’s a good financial reason not to do it.

I have clients on both sides of the arbitration aisle. What I’m looking for is consistency in the application of laws regarding arbitration. I don’t see it here. Once again, Securities America seems to be making up the rules in its favor as it tries to deal with a problem. Good luck with that.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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Marketwatch article by Suzanne Barlyn describes use of BrokerCheck system

The FINRA BrokerCheck system has been around for years. “In the old days” it was a manual system. A customer called a toll-free number and asked for the broker’s information. The information was mailed to the customer and a copy was sent tot he brokerage firm. This was good for the customer (kind of) and a nightmare for the brokerage firm since they were receiving many copies of requests for which they had no use.

Then came the internet. Clients were able to request information over the internet, without human intervention. At the same time, it meant that a competitor could steer a client to BrokerCheck to look at the report of another broker the client was considering. This still happens today. BrokerCheck reports were, and still are, limited in scope. But changes have been made.

As Suzanne Barlyn reports here, the BrokerCheck system has changed again. There is more depth to what is reported and former brokers with certain “marks” on their record will remain on the system even after the passage of two years’ time (the old cutoff). This will allow the investing public to check out the unregistered investment counselor’s background and the reason why he/she is not with a brokerage firm.

Overall, disclosure is good. My position on U-5 filings is stated in the article – specifics are generally much better than generalities, provided they are true.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida.

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A blast from my past.

When I first started in the brokerage business, I was an in-house lawyer at Prudential-Bache Securities (which then became known as Prudential Securities, which was then purchased by Wachovia Securities, which was then purchased by Wells Fargo Advisors) in charge of the firm’s collections. I had a number of “interesting” cases, one of which involved a firm customer named Robert Bialkin. (Mr. Bialkin passed away in 2000, according to his New York Times obit.)

Mr. Bialkin owed Prudential-Bache money. I remember meeting him in my office. I had information that led me to believe that my physical safety was at risk, so I had the head of the firm’s corporate security department stand outside my office (with his gun discreetly holstered under his suit jacket). My meeting with Mr. Bialkin was uneventful, but unproductive. He was not going to pay the firm the substantial sum he owed.

We started litigation in Boston in Federal Court. We were represented by Bingham, Dana & Gould (now known as Bingham McCutcheon). My direct testimony was submitted by affidavit, as was Mr. Bialkin’s if I recall correctly. Anyway, I became aware that Mr. Bialkin claimed that I had threatened him in my office. He said that I told him something along the lines of “I want my f—-ing money.” I am known to use the occasional profanity, but I recall specifically not using it when talking to Mr. Bialkin. Remember, I was concerned about my safety.

As I said, my direct testimony was by affidavit but I flew to Boston to be cross-examined in front of the jury. Mr. Bialkin’s lawyer asked me if I threatened his client. I told him no. He asked if I had used the profanity I described above. I told him I was certain I did not. He made the fatal mistake of asking me “why?” And I told him what I had learned about his client and that I was concerned about my physical safety. He objected to my testimony, but the jury had heard it. We won the trial.

Mr. Bialkin appealed. I recall the appeal and the briefing. I kind of wish I had it, because it would probably be entertaining reading, like a walk down memory lane. As I recall, one of the appellate issues was whether it was appropriate to allow my less-than-favorable testimony about the background I had developed on Mr. Bialkin and its effect on the jury. The First Circuit ruled here. Mr. Bialkin was unsuccessful. The court essentially said “Your lawyer asked the question. Just because you didn’t like the answer, doesn’t mean it should be stricken.” and upheld the jury’s verdict. That was 1992 (and I can’t remember what I had for lunch yesterday.)

The old saw “Don’t ask a question you don’t know the answer to” sometimes applies. In this case, it sure did.

That’s a nostalgic view of one lawyer from Jupiter, Palm Beach County, Florida. I’m a warm and toasty Marc Dobin.

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A Wharton Professor agrees with me – Indexed annuities ‘terrible ideas’ for seniors

Nobody should be surprised by this. I’ve been telling people for years that Equity Indexed Annuities are the roach motel of investments. Now Investment News has run an article that backs me up. Indexed annuities ‘terrible ideas’ for seniors, says Wharton prof – Investment News

These things are garbage. I really wonder what kind of defect someone possesses to sell them to a customer, particularly a senior. And, now that the insurance industry has gotten their way, they are still not regulated as securities. So any person with an insurance license can sell this junk to the unsuspecting public.

I have discussed this before, and an apologist named Sheryl Moore has called me, written me and blogged about me. She thinks I’m wrong. I’m not and now a Wharton professor agrees. Now if she could only spell my name correctly. She claims to be an industry expert. But she does not claim to be an expert on spelling.

These “products” are hard to understand, difficult to unwind and expensive to own. I can’t fathom why anyone would sell one.

That’s the unindexed annuity view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin

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