FINRA amends hearing location rules.

Sometimes I wonder. FINRA is the organization responsible for administering the vast majority of the securities arbitrations in this country. One of the items FINRA decides is the location of the hearing. When I was a younger lawyer in New York (I’m still young), there were hearing venues in only a handful of locations, although we were grateful for Fort Lauderdale in the winter.

FINRA started adding venues within the last few years, in part as a reaction to some court decisions relating to the unenforceability of an arbitration agreement where there was no hearing venue within the state. FINRA now has hearing venues in all 50 states. I am currently scheduled for two hearings in Honolulu, Hawaii. It’s a tough job, but somebody has to do it.

The weirdness comes, as the Hawaii cases show, when the customer lives outside the United States. The claimants in the Hawaii cases live in Australia, so Hawaii is the closest venue. I had a case where my client lived in Belgium. His broker was in Florida. He chose me, a lawyer in Florida, for that reason. FINRA set the case in New York City, the closest hearing venue to Belgium (I guess we’re lucky they didn’t set it for Portland, Maine, which I think is closer.)

FINRA, in announcing the recent amendment, used another example. If a customer lives in Hoboken, New Jersey, the hearing would have been set for New York City, because NYC is closer to Hoboken than Newark, the next closest venue. Of course, Newark is usually easier to get to than NYC if you’re trying a case. So FINRA has amended its rules to provide for the primary choice for venue to be in your own state instead of being a slave to Google maps.

At least I’ll always have Hawaii.

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

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James J. Duffy joins Marc S. Dobin, P.A.

Marc S. Dobin, P.A. is pleased to announce that James J. Duffy has joined the firm as an associate.

James is a Florida native and, to prove that, he is both a Gator (graduated with BS in Finance in 2006) and a Hurricane (graduated from University of Miami Law School, cum laude, in 2009). James comes to us after a Fellowship in the Foreclosure Defense Project of University of Miami Law School.

One thing that is interesting about James is his two internships. He interned at both the SEC and FINRA in their respective Enforcement divisions. James is very interested in the securities industry and these two internships gave him great exposure to the regulatory side of the securities business.

We welcome James and look forward to sharing his talents with our clients and friends.

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The not-so-new u-4 and U-5 filing requirement.

I remember the U-4 and U-5 when it was short. I remember when defamation cases relating to U-4s and U-5s were few and far between. Now the U-5, when it is printed, is many pages long, but most of the time it is completed online using the WebCRD system.

But here’s the changes that drove people nuts. In the “old” days, the U-4 was required to be amended when the registered representative was the “subject of ” a consumer-initiated, investment-related complaint in excess of a specified dollar amount (which, by the way, was not adjusted for inflation). Then, for reasons that escaped me (and no one asked), the rule required that the stockbroker be a named respondent in an arbitration or named in a written customer complaint. So there was this big loophole for brokers who were not named in an arbitration or the subject of a verbal complaint.

The loophole was changed in May 2009 but it appears that it is taking some time for firms to catch up. The new rule, which is almost a year old, has reverted to the old rule. A broker who caused the complaint, but is not named, will still see the complaint on a U-4 or U-5 amendment. A verbal complaint will now be treated the same as a written complaint.

Why does this matter? Product cases are one example. Let’s say a broker sold a whole lot of Auction Rate Securities. Prior to the change, an arbitration claim that stated that the client was told by the broker that the product was “safe” would not result in an amendment to the U-4 or U-5. That would be because the customer’s lawyer did not name the broker as a respondent.

Now the same allegation will result in an amendment. This makes the broker unhappy, because the broker does not like amendments, particularly in product cases. This makes the claimant’s lawyer unhappy, because an unhappy broker is usually an uncooperative one.

I’m not sure why the rule was amended during the intervening years. It did not make sense to me. And while the “new” rule will result in more reporting, it seems to make sense to me. And very few things do…

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

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Jesup & Lamont tries to teach FINRA who’s boss – good luck

Dan Jamieson at Investment News reports that Jesup & Lamont is tangling with FINRA over what it considers to be unfair treatment of the firm. The general counsel of Jesup is a former litigator from Greenberg Traurig and someone that I have known for a long time. In fact, now that I think about it, we’ve known each other since before either one of us graduated from law school.

Anyway…Jesup keeps poking FINRA in the eye. According to the article, Jesup called the police to report that FINRA auditors from the Boca Raton office were trespassing. Let’s just say that this wouldn’t have been my first move. On the other hand, ff you’re trying to move your firm to the top of FINRA’s hit list, this would be the preferred method. I am certain that FINRA auditors enjoy being regarded as trespassers.

The late Jim Croce wrote a song called “You don’t mess around with Jim.” The refrain is “You don’t tug on Superman’s cape,You don’t spit into the wind. You don’t pull the mask off the old Lone Ranger
And you don’t mess around with Jim.” While FINRA would not regard itself as coming from the planet Krypton or a masked crusader for justice, a surefire way to get FINRA to torture a firm is to make FINRA think that you don’t respect the organization. And given FINRA’s newfound interest in catching bad acts, it would not surprise me if Jesup ends up on the receiving end of one or more FINRA disciplinary actions. I’ve seen it before.

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

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Investment News confirms my suspicions about CFP Board and others.

I’m not a big fan of the CFP Board. I don’t think it’s that hard to get the CFP mark. And their “disciplinary” procedures really strike me as a kangaroo court.

Now Investment News has uncovered the CFP Board’s little secret, along with the secrets of other grantors of marks. The article points out that these grantors (they are NOT regulators) do not pay much attention to the people to whom they’ve granted the license to use the marks.

The common theme in the article seemed to be that these grantors use the Internet and rely on complaints to determine if they should take action against a licensee. My experience is that the grantor waits until after the real regulator has done its job (usually FINRA) and then swoops in to pick over the bones.

My experience with the CFP Board is that the so-called disciplinary rules are draconian and are slanted in favor of the Board. The timelines are short, the hearings are held in inconvenient locales and the licensee has to pay a fee just to be heard. And people complain about the lack of due process in arbitration! My advice to CFP licensees when the CFP Board comes knocking, why bother? Do people really pay attention to the mark? Or do they care that you, the financial professional, do a good job?

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

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FINRA announces social media webinar.

The Financial Industry Regulatory Authority, as the securities industry’s regulator, is on the lookout for new and creative ways for brokers to get themselves and their firms in trouble. First it was email. And lawyers had a field day with whether or not email constituted correspondence or simply a “communication”. Systems were developed, along with rules, to supervise email.

The World Wide Web came along with email. Obviously this was a form of advertising, but how was it going to be regulated by FINRA and supervised by the firms?

The next hole in the dike was Instant Messaging. How could a firm supervise that? Thanks to “open architecture”, certain IM systems could be used and supervised.

Now we have social media such as Facebook, LinkedIn and, to a lesser extent, MySpace. This is, by no means, a complete list. And it does not address the foreign sites. What’s a firm to do?

One alternative is to ban the use of social media altogether. That would be a nice try, but I doubt it would be effective. Another is to regulate it and supervise it. this is the route that they will need to follow. FINRA is offering a webinar (how fitting) on social media.

There are some interesting questions here. If a broker is friendly with a client before the client relationship existed, what communications need to be supervised? How about if the client and broker become friends after the relationship is formed? I know that, in my representation of brokers, they frequently develop client relationships with people they like. This is what we called a “slippery slope” in law school. In other words, where does the line get drawn? We’ll see.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. My name is Marc Dobin.

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Marc S. Dobin quoted in Compliance Watch Blog for Dow Jones.

I was quoted on the Compliance Watch blog by Suzanne Barlyn. Suzanne is a well-respected reporter on the financial scene. She knows who to talk to and asks the right questions.

This article was written about former Lehman Brothers brokers who are left defending claims regarding products sold while they were employed at Lehman. With the bankruptcy of Lehman, there is no traditional “deep pocket” so investors are looking to their broker for restitution. This is generally not an effective strategy as most brokers do not have the kind of money the client is looking for.

The larger firms generally do not have insurance against these claims. So the brokers are unprotected as well.

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

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Look, Mom, I’m on television

A client sent me this link to a YouTube video. It appears that one of the hard-working traders in the background was using his expensive equipment for something other than trading. His employer was not amused.

That’s the bemused view of one lawyer from Jupiter, Palm Beach County, Florida. My name is Marc Dobin.

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