Ex-Newbridge Securities Broker Sentenced to Six Years in Prison “-” No Surprise Here.

The Palm Beach Post reports that Brent Deviney had a gambling addiction.  He blames that gambling addiction for the theft of funds from his in-laws.  If anyone had looked at Deviney’s record with any sort of jaundiced eye, they would have realized that he was a ticking bomb waiting to go off.

For all the brouhaha about the FINRA Brokercheck system, this case pretty much confirms that Brokercheck does not help people avoid bad brokers.  Prior to his problems at Newbridge, he was accused of forging customer names on account documents so that he could become the servicing broker on annuity accounts.  The State of Florida delayed his registration for 3 months, fined him $5,000 and put him on a supervision agreement for 2 years.  FINRA suspended his license for 6 months (but gave him credit for the 3 months that Florida meted out) and fined him the same $5,000 that Florida did.  In fact, FINRA gave him full credit for the money paid to Florida.  But he managed to stay in the business because a firm was willing to hire him.

Fast forward a couple of years and, SURPRISE!, he’s stealing money from his in-laws and his wife’s IRA.  He was also the subject of a million dollar arbitration award, but that was after he was fired.  Based on the description of the claims, it appears that at least some of the money he stole from his wife came from a Merrill Lynch account.  His wife and his mother-in-law’s estate both obtained awards against him.

Society will get its revenge.  This miscreant will be put away for 6 years starting in a couple of weeks.  That will give him plenty of time to think about what went wrong here.

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

FINRA Dispute Resolution Statistics Show No Advantage To All-Public Panel

I keep waiting to be wrong.  In fact, there are many instances where I am wrong.  But I don’t think I am in this instance.

FINRA has released its latest arbitration statistics and the hand-wringing and stat-twisting from the Claimants’ bar will likely continue unabated.

But the numbers are the numbers and here’s what we know through the end of March 2014.  The “win” percentage of all-public panels so far in 2014 was 33%.  The “win” percentage of majority-public panels was 43%.  Isn’t that a surprise?  So, again I ask – What was the purpose of this change?  It’s like the placebo portion of the test is getting healthier than the patients taking the test medication.

Worse still, the numbers have flipped.  If we include all of 2013 and the first three months of 2014, the all-public panels are at 42% and the majority-public panels are at 44%.  And the numbers are trending up, not down.

So I ask again – Why did we do this?  Will the Claimants’ bar now allege that even the all-public panels, devoid of any industry panelist influence, are still biased against claimants?  Or is it, as I have thought all along, that crappy cases go to hearing and the Claimants’ bar thinks, apparently without basis, that an all-public panel will be comfortable with wool over its eyes.

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

The FINRA All Public Arbitration Panel Revisited

Two months ago, I wrote a post about FINRA All-Public panels and how they don’t seem to make a difference. FINRA has released its statistics through September 2013 here. Guess what? Nothing has changed.

The number of cases decided by both classes of panels has increased. The Majority-Public panel award percentage has held steady at 41% finding for Claimant. The All-Public panels have moved from 42% to 43%. This is insignificant given the number of cases decided. In fact, with the new numbers, if only one more case had been decided in favor of the Respondent, the numbers would be virtually indistinguishable.

So what does this mean? I’m not sure. One thing I take away from it is that I don’t put a lot of stock in all the hand-wringing about arbitration panels being a stacked deck because of the industry panelist. Take away the industry panelist and it looks like the “win” rate is just about the same. So much for the stacked deck.

That’s the “I told you so” view of one arbitration lawyer from lovely Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

I am not immune to cold calls. Note to Joseph Gunnar, stop calling me.

I’ve been getting cold calls lately. I don’t know what list I got on, but they’re a pain in the neck. First of all, it’s never a large wirehouse broker who calls. It’s always some guy with a New York accent. I have nothing against New York. I went to school there. I worked there. Some of my oldest and dearest friends are in New York. But the accent is the first tip.

The second tip is the following statement “It’s been a while since we last talked…” Stop right there. We never talked. I am not a moron. I remember who I talk to. And I know I didn’t talk to some guy like you in any recent memory. Because you would have remembered better than I. I am not pleasant to these guys. They annoy me, these cold call cowboys.

Today, I received a call from Kevin at Joseph Gunnar. (I see they have a person named Joseph there. I wonder if they have anyone named Gunnar.)

He starts with how it’s been a while since we talked. I told him, we’ve never talked. He says “Sure we did, when you were with John Thomas.” Of course, I’ve never done business with John Thomas, which has recently been in the news. So I tell him that we don’t know each other and have never spoken.

Then I ask him my favorite question – “Do you know who I am?” So this nitwit says “Sure, you’re Marc Dobin.” I then ask him if he bothered to look me up on Google to see who I am. It’s not hard to find me. I tell him to bring me up on Google and I will be happy to explain to him how many regulations he violated just during the brief conversation we had. I told him, not so politely, not to call me again. I noticed on my phone records that they have called my office before and I don’t want them bothering me any more. I told him that I would sue his firm for continuing to call me after I tell him to stop.

It’s been a few hours, but I’ll bet they’ll call again.

I noticed from my phone logs that I am getting regular calls from John Carris Investments in New York. I wonder what they could want.

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

Morgan Stanley Wealth Management Ordered to Pay 1 Million Dollars in FINRA Arbitration.

We had the distinct privilege of representing Greg Torretta in an arbitration against Morgan Stanley Wealth Management (formerly known as Morgan Stanley Smith Barney). Greg worked for Morgan Stanley and its predecessor companies for 26 years. He started as a trainee with EF Hutton (When EF Hutton talks, people listen) in 1984. He kept going to the same job every day. The firm changed its name any number of times. But Greg kept working.

Greg was the perfect example of a company man. He relocated his family to Texas when the firm asked him (firmly) to take over the Houston branch complex there. He relocated to New York, and lived apart from his family, to be a Regional Director for Smith Barney (as his employer was called then). He waited patiently to find out if he had a job after the Morgan Stanley – Smith Barney merger. He took the job as complex manager of the Garden City, New York complex, which was a lower prestige position than Regional Director. But he kept at it.

He was asked to coach a subordinate manager and see if he could be salvaged. He did what he was asked. But he eventually realized that this manager just wasn’t going to make it in the MSSB system. He recommended a termination, which he could have done all along. MSSB dawdled a bit. The manager sensed that Greg was going to fire him. So he took aggressive action to save his job. He and MSSB sacrificed Greg in the process. Greg felt that he wasn’t handled the same way that other employees had been treated in similar situations. And he felt that, after 26 years with the same company, he deserved a bit of consideration.

MSSB would have none of that. A swift decision was made that Greg would either resign or be fired. He resigned, having never been fired from a job before. He thought for a few months and then he hired a lawyer. Notice I didn’t say that he “found” a lawyer. He didn’t find us. I’ve known Greg for almost as long as I’ve been in Florida. I coached his younger daughter in soccer. I was honored that he came to my firm for representation.

We started to work on the case. While we were investigating, MSSB realized what Greg knew all along — the branch manager must be fired. MSSB fired the manager for the very reason that Greg wanted to fire him. But it was too late, and corporations are not well-known for saying they’re sorry.

We filed the arbitration. MSSB answered the claim. We had four and a half days of hearings last September and November. We demonstrated that Greg had big damages. These weren’t made up numbers but real facts. People at Greg’s level within MSSB are well-compensated. The hearing was hard-fought. Opposing counsel was a good lawyer. And he had quite an impressive track record. From what I could tell, he didn’t lose very often.

The arbitration award showed up in our office late Friday afternoon. The arbitration panel awarded Greg $1,000,000. That’s a lot of zeroes. But Greg deserved it–and more. But most of all, Greg felt vindicated. He felt that the panel saw what he knew to be the case, that Morgan Stanley had obligations and didn’t fulfill them. That he had been mistreated. And he saw that, despite its many critics, at least this time the system worked.

Yes, winning feels better than losing. Anyone who denies that is lying. But winning for a client who you genuinely like and respect is a reward on a different level. We were glad that we got Greg some relief. We can’t unwind history, but can tell Greg that the panel agreed with him. And that’s what arbitration is all about.

Every case is different. Every arbitration panel is different. Every client is different. I could lose a big case tomorrow. But last Friday, when I was talking to Greg, I was glad to be a lawyer and glad to be his lawyer.

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

FINRA looking at broker incentives, again.

For as long as I’ve been involved in the brokerage business, brokers have had financial incentives. There are commissions, management fees, bonuses, trips to islands, one time there was even a contest that gave out nearly 100 leases on Porsche sports cars. FINRA knows this goes on.

Suzanne Barlyn reports that FINRA is looking at incentives again. Give me a break.

This really is the equivalent of the piano player at a bordello saying “you mean there’s women upstairs?” or words to that effect. FINRA knows this is going on. I remember going to an SIA (the predecessor to SIFMA) conference where the chair of the SEC said that recruiting bonuses were bad because they weren’t disclosed to customers. This was like 15 years ago!

FINRA is just getting around to looking at recruiting bonuses? I would say that 30-40% of all arbitration awards are for promissory note cases. And FINRA is just now noticing? Spare me.

I will be stunned if FINRA does anything because they won’t be able to figure out how to draw the line. Will it be when a broker gets a higher payout than grid? A forgivable loan? Expense account money? FINRA won’t be able to figure it out and the firms certainly aren’t going to help. But I doubt very seriously that FINRA is going to require a broker to disclose the terms of their employment with their new employer. I just don’t see it.

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

FINRA allows for special procedures for big cases.

FINRA announced this week the establishment of a pilot program for cases involving $10 million dollars or more. If your claim is $9.5 million, you’re not out of luck. The “pilot program” is available to any case, but they are targeting $10 Million dollar cases and above.

Basically, the new procedures will give the parties (inmates) the ability to make their own rules (keys to the asylum). FINRA is making a large assumption — that lawyers on opposite sides can mutually agree on anything other than the other lawyer is a nitwit. If lawyers are so agreeable, why did FINRA have to amend its arbitrator selection procedures to make sure that at least two arbitrators remained on the list after the parties exercised their strikes? Because most lawyers in “litigation mode” are disagreeable and uncooperative.

I know I’ve mentioned this before, but there was a time when an arbitration over $250,000 warranted five arbitrators. It was like being in front of an appellate bench (although most in Florida are 3 judges). Now FINRA is allowing the parties to change almost any rule.

And FINRA will allow all those discovery vehicles that courtroom-oriented lawyers love so much — interrogatories, admissions and depositions. I can hear the slobber drooling off of the faces onto the desks of hourly lawyers all across the country. Now lawyers can’t be sanctioned for outrageous discovery conduct (because arbitrators don’t have that authority), so they can act like spoiled children in a sandbox with impunity. Cynic? Me? No.

The good news – parties can only enter into the pilot program upon consent of all parties. The bad news – once there is agreement, and it looks like it was a bad idea, a party can’t back out. All or nothing folks.

So who will sign up for this? My guess is it will be large institutional claimants and respondents who are represented by large institutional law firms. Let’s face it, most of those firms aren’t really comfortable in arbitration anyway. Now they can assign the squadron of young, under-utilized, lawyers to all the menial tasks that they were missing out on when a case was in arbitration.

Basically, it appears that the only the thing that may end up missing from this is a judge and jury. It will be interesting to see how this program plays out.

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

FINRA sanctions brokerage firm for taking too much customer information.

There is now apparently a difference between taking customer information and taking too much customer information. Since I joined the securities business in 1983, brokers have moved from one firm to another with varying levels of difficulty and information. In the stone age (when we only had copiers), brokers would copy their holding pages (paper forms for those of you unfamiliar with the term) which had a whole host of customer information including social security numbers, birthdays, mother’s maiden name and other minute details of the customer’s life.

Brokerage firms litigated the heck out of the copied information and argued about what was proper and what was improper. Sometimes the firms used Regulation S-P as their weapon. This Regulation governs privacy of customer information. In broker recruiting, Regulation S-P appeared to be honored in its breach.

Along came the Protocol for Broker Recruiting. This changed things. Suddenly, the founders and the adopters of the Protocol agreed that certain limited categories of information were fair game to be moved from one firm to the other. The SEC and FINRA are aware of the Protocol. To describe their enforcement efforts in this area as “rare” would be an understatement.

About 4 years ago, Next Financial was found to have violated Regulation S-P by the SEC. As they say, bad facts make bad law and the facts in that case were pretty outrageous as they were described in the Initial Decision. This case was decided in June 2008 but was underway starting a year earlier. NEXT employees, according to the decision, took a broad range of information from the “losing” firm and also used the other firm’s employees’ usernames and password to access computer systems. Oops.

Fast forward to 2012. FINRA has joined the Regulation S-P game. In a recent decision, FINRA fined a member firm $65,000 for taking customer information and using it to start the account opening process on its own books before the customers had agreed and before the brokers had left their prior firm. FINRA alleges that the firm obtained “nonpublic confidential information included the customers’ social security numbers, account numbers, driver’s license numbers, dates of birth and financial information.” Apparently, names, addresses and phone numbers are fair game, as this is what is allowed by the Protocol, but those numbers, Social Security and Driver’s License, are off-limits.

The ironic part of this is that the questioned activity took place in December 2008, according to FINRA. Apparently this broker-dealer didn’t get the memo.

So what is the takeaway from this? Stick to protocol data. Aside from the fact that it should keep a broker out of hot water, it is also a good time to update all the vitals. Working from 10 year-old suitability information? Update it. Customer remarried and has a new job? Change your data. Maybe you’re a lucky one and your customer won the lottery. Change the financials. Moving is a good chance to do two things: Update customer data and weed out your book. It is not the time to see exactly how much data one can download from the current firm’s system.

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

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.

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.