The Palm Beach Post reports that Paul Elvidge, a broker formerly with Seacoast Investor Services and Cape Securities, pleaded guilty on embezzlement charges in Federal Court.  He reportedly stole over $1 million dollars.

First thing I noticed when I went to Brokercheck was that there are two people named Paul Elvidge, although one is Paul Elvidge, Sr.  Assuming that Brokercheck is accurate, and there are two people (who appear to be closely related), Paul Sr. was sanctioned by the State of Florida because he failed to establish written supervisory procedures for the Seacoast.  He defaulted on an administrative complaint and the State denied his application to be a broker.

Paul (or Paul Jr I’m assuming) has a different CRD# and different allegations.  He is alleged to have wired funds from customer accounts to his personal account.  The customers were unaware of the wire transfers.  I’m thinking that the failure to have written supervisory procedures may have had something to do with his ability to accomplish this feat.  Well, I’m thinking this Paul is going to do some time at Club Fed.

I hope that there was some insurance somewhere that paid back these unwitting investors.  But remember folks, read your statements!  Open your mail!  Ask questions and don’t buy the answer, “Oh, it’s just a computer error.”  Be vigilant.

Some friendly advice from one lawyer from Jupiter, Palm Beach  County, Florida.  I’m Marc Dobin.

I’ve seen impatience.  I’ve seen incompetence.  I’ve seen boredom.  And, yes, I’ve seen arbitrators who have fallen asleep.  But a couple of weeks ago, in a FINRA securities arbitration, I witnessed something unlike I had ever seen.

I was supposed to be in an arbitration last week, but over a month ago the Claimants asked for a postponement of the hearing, among other things.  The issue was argued with a Response from us and a Reply to the Response.  It was fully fleshed out in the moving papers.  A telephonic conference was set for 3 weeks ago.  All the arbitrators and lawyers were on the telephone conference.  It was confirmed that everyone was on the call.  The Chairperson made his introduction and preliminary remarks.  He turned the focus to Claimants’ counsel, who started to present her argument.  Then, it happened.

The industry arbitrator, with whom I am not familiar, interrupted the lawyer.  He directly addressed the Chairperson.  He told the Chairperson that he was opposed to any adjournment.  And, he added, it was time for the Claimants to “shit or get off the pot.”  You could sense that everyone on the call was caught off-guard.  I felt like I was reliving a Janet Jackson Super Bowl performance, saying to myself “Did that just happen?”  The Chairperson took control and advised the industry panelist that the parties were going to make their presentation and then there would be deliberation.  Wrong.

By the end of the day, Claimants’ counsel had filed a motion to recuse the arbitrator.  The following day, we were asked by FINRA to respond quickly, which we did.  And we said that the arbitrator was merely saying what everyone was thinking — it’s time to try this case.  He could have chosen better language, perhaps, but everyone certainly got the message.  The Claimants claimed that he had prejudged their position.  My response to that? So what.  It’s an adjournment request.  There was a Motion, a Response and a Reply.  What more was going to be said that had not already been written? Nothing.

The arbitrator was presented with the motion and our response early in the afternoon of the day after the hearing.  He declined to recuse himself.  Within a couple of hours, the Director of FINRA Arbitration had removed the arbitrator pursuant to FINRA Rule 12407.  In order to do this, the Director must find “that the arbitrator is biased, lacks impartiality, or has a direct or indirect interest in the outcome of the arbitration.”  Apparently, coming to a conclusion based on the written submissions of competent counsel, then voicing one’s opinion using colorful language, makes one based or lacking in impartiality.  So what, then, is the purpose of the written submissions if not to sway the opinion of the arbitrators?  Are arbitrators required to ignore the arguments and not find anything persuasive, regardless of how obvious the issue is?  Frankly, the Director’s decision wreaked of political correctness but not the facts.  And those who know me, know that I don’t play the PC card.

So we have a new arbitrator and the Claimants got their postponement.  We’ll see how this plays out.

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

Remember PIABA? This is the organization that was formed about 20 years ago.  Its genesis was getting a bunch of claimants’ lawyers together to take on the brokerage firms which, at the time, were fighting limited partnership cases tooth and nail.  I have friends who belong to PIABA.  I don’t.

So FINRA released its securities arbitration statistics yesterday.  For the first 11 months of 2013, investors did imperceptibly better with a mixed panel than an all-public panel.  The difference is one percentage point so the difference is insignificant.

So what does PIABA do?  They weasel.  The new president of PIABA, Jason Doss (whom I don’t know), is quoted as saying that the system is fundamentally flawed if he and his fellow PIABA members can’t win more than half of their cases that go to hearing.  I call BS on that.  I have always maintained that the numbers are skewed because the “good” customer cases get settled while the not-so-good or “bad” cases go to hearing.  So these settled cases don’t count as wins or losses, just cases that go away.

What a load of garbage.  It is intellectually dishonest, frankly, to take anything away from these numbers other than exactly what they say — In the last 11 months, about 43% of the people who go to arbitration win their cases to some degree.  End of story.  What about all the cases that settle but only go to hearing on expungement?  Are those considered wins for the customer since it is likely that the customer got paid?  Nope.  What about the cases that settle and the arbitration is simply dismissed. Those don’t count either.

Give me a break, folks.  PIABA is trying to manipulate public opinion with a terrible premise — that claimants are somehow entitled to win at least 50% of the time.  That’s bogus and Mr. Doss and PIABA should know it.  Oh, and PIABA claims that brokerages are more inclined to settle cases with three public arbitrators.  In the last nearly 3 years, I have never had that discussion with anyone.  Oh, and PIABA has no empirical proof of this either.

I guess this is why I don’t get invited to their parties. (insert sad face here)

That’s all for today.  I’m Marc Dobin, non-PIABA securities lawyer in Jupiter, Florida.

FINRA has released its statistics through November 2013.  Surprise!  The results are not statistically different.  You can see the table here.  You have to go all the way to the bottom.  FINRA buries this comparison there.

In November of last year I commented that the stats looked like they were coming together.  And they are.  Even worse, though, is that the mixed panel result is one percentage point higher.  While it is not statistically significant, in my opinion, it is telling.  Through November, the “win” rate for customers is 43% with an all-public panel versus 44% with a mixed panel.  Big deal.  So we went through this whole rule rewrite just to prove what?

Even more interestingly, the win rates from 2011 through 2013 with all-public panels are steadily declining while the win rates from mixed panels are increasing.  What does this mean?  It means that, for all the handwringing from devout customers’ lawyers about the “stacked deck” it appears that the deck is not so stacked.  At least not in 2013.  Where is the clarion call to ban all-public panels?  That silence you hear is deafening.

My guess is that these same people who were touting all-public panels as the cure will now claim that the arbitration process is flawed and we should do away with it altogether.  There are some in Congress (who have nothing better to worry about, like balancing the budget or funding the cure for cancer) who have started the same handwringing.  Just wait until they abolish arbitration for customers and those customers can’t find a lawyer to take their $25,000 case.  Then what?

Do I sound cynical?  I am.  There’s a few miles on my odometer and I feel like I have heard this tale of woe for too long.  Leave arbitration alone.  Go fix something that’s broken, like Congress.

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