SEC files insider trading charges involving Post-it note eating.

OK, here’s a tip.  If you feel compelled to eat Post-it notes or napkins because you don’t want someone to know what you’re doing, your conduct is probably bad.  Apparently, the “middleman” in this insider trading scheme didn’t see anything wrong with consuming office supplies.  He sure didn’t see it as an indication of illegal activity.

The SEC charged two people, a law firm employee and a registered representative, with insider trading.  The law firm employee would allegedly disclose to the middleman the names of companies that he learned about from the firm’s files.  The middleman would then, allegedly, write the ticker symbol on a Post-it or a napkin, show it to the stockbroker, then chew up and/or swallow the piece of paper.  Ick.

The broker is then alleged to have concocted a paper trail showing the reasons for a recommendation to buy the tipped stock.  He also is alleged to have made this recommendation to a number of unsuspecting clients who just thought he was a good stock picker.  Wrong.

Oddly, the Post-it note eating middleman has not been charged.  Maybe eating Post-it notes was punishment enough.  I hope he used the small ones.

So the SEC figured out the little scheme, it claims.  FINRA got credit in the press release.  No word on whether they recovered any of the Post-it notes.

Print Friendly, PDF & Email

Microcap fraudster stopped by SEC

Are people really this stupid?  Really.  Are they this stupid?  This removes my faith in humanity.

A guy holds a large position in a thinly traded penny stock.  He uses nominees offshore to do it.  He then sends an email blast to 700,000 sheep, I mean “people”, touting the stock.  He apparently found a bunch of sheep, I mean “people”, who believe everything they receive in their inbox.

So a bunch of these sheep, having received this unsolicited email, think “Here’s a great idea.  Let’s buy this piece of crap thinly-traded stock because this email says great things about it.  And while I’m at it, I’ll buy some of those all natural male “enhancement” pills, too.”

So the POS stock increases in price and volume, giving the promoter/emailer/sheep fleecer a handy profit of over $1,000,000.  But the SEC caught wind of this plot and shut it down.  You can read what they did here.  Nice work by the SEC to protect the sheep from themselves.  But really, who believes these emails?  Remember the voicemail scam from a bunch of years ago?  A woman left a voicemail saying that her boyfriend gave her a hot stock tip that she’s not supposed to share.  The key was that the voicemail was supposedly for someone else.  That’s what made the tip sound legitimate.  You can read about one SEC enforcement action on phony voicemail tips here.

Folks, investing is not as easy as buying a stock you hear about in an unsolicited email or a misdirected voicemail.  But if you’re interested in a bridge….

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

Print Friendly, PDF & Email

Wells Fargo Advisors, LLC pays money in two promissory note cases.

This is a bit of “man bites dog” news.  The overwhelming majority of promissory note arbitration cases filed by brokerage firms result in awards to the firms.  This does not account for settlements, which may or may not be for the full amount of the note.  But a broker needs to understand that a promissory note case generally feels like the burden of proof has shifted, forcing the broker to prove why the money is not owed.  And panels are skeptical.

I have won a very small number of these cases, less than five I think.  And I have handled a bunch.  I have settled a bunch, the terms of which are confidential, for a favorable outcome for my client.  And I have tried a few that could have settled favorably, but my client turned down the resolution.  Anyone who tells a broker that these cases are easy and simple to win is simply not telling the truth.  They are hard and the odds are against you.

That is why these two Wells Fargo Advisors cases are so interesting.  The awards were issued one day apart.  In the first case, an arbitration panel in California denied Wells Fargo’s claim for $78,000 and awarded the broker $800,000 where the broker claimed damages for “wrongful termination in violation of public policy (retaliation): defamation; violation of California Labor Code Section 1050 – Blacklisting; intentional infliction of emotional distress; breach of written contract; and promissory estoppel.”  The broker claimed that he was defamed on his U-5.  This appeared to be related to an internal investigation into the change of some administrative information on a form.  The arbitrators clearly decided that Wells Fargo acted incorrectly and used the award to change what had happened.  The arbitrators also ordered expungement of the termination reason on the broker’s form U-5.  As it is often said, bad facts make bad law.

The second case was a different result, but an interesting finding.  It appears that the Texas-based broker felt that he was ambushed when he was let go by the firm and that he was defamed.  The arbitrators upheld the promissory note claim but awarded $30,000 on a counterclaim.  It is some of the language in the award that is most interesting.  “The Panel believes, nonetheless, that some of the methods that Wells Fargo used to effectuate the termination to its best advantage were both opportunistic and inelegant. The Panel also believes that some of Wells Fargo’s conduct following the termination was intended to impede clients’ access to Mr. Ratcliff in his new position;”  Very interesting.  Given the size of the award on the counterclaim, the broker was probably slowed down in transition, but not harmed to much financially.  Either way, it’s not often that a brokerage firm’s conduct is described in this manner.  This is not good language for Wells Fargo going forward.

In a case that I handled last year against Wells Fargo, the panel ordered my client to pay the note, but cleaned up his U-5.  This is the panel’s way of saying “you owe the money, but your career doesn’t appear to have been harmed any by the U-5.”

Frankly, to a number of brokers, the U-5 is more important than the promissory note.  The U-5 is what stays with the broker for the balance of their career.  Expungement or modification of a defamatory U-5 usually can fix that problem.  So can broker-dealers doing the right thing when completing the form.

That’s the view of one lawyer from sunny, beautiful, nearly 80 degree, Jupiter, Palm Beach County, Florida.  I’m Marc Dobin.

Print Friendly, PDF & Email

A rookie cold caller – Michael Valeri from Lampert Capital Markets, Inc.

Mike Valeri from Lampert Capital Markets just called me.  He said we spoke a long time ago and that I said I already had too many brokers in New York.

Of course, both of these are untrue statements.  First, Mike Valeri has only been registered since October.  So his definition of a “long time ago” must be different than mine.

Second, because we never spoke, there’s no way I could have told him that I had too many brokers in New York, since I have no brokers in New York and haven’t had any brokers in New York in close to 20 years.

Then he asked me if I had an account with John Thomas Financial, which I didn’t.

He then told me that he must have the wrong guy.  At least he got that right.

Good luck with your cold-calling career, Mike.  Maybe you could get a job as a storyteller, too.

Print Friendly, PDF & Email

Make LinkedIn more useful for your practice.

I know, I know. Where is the curmudgeon? He’s taking a rest. Actually, I’m not that much of a curmudgeon, it’s just that stuff has put me in a bad mood lately.

But tonight I will be a speaker at a Palm Beach Bar Association Young Lawyers’ Section seminar on various topics. One of them will be social networking. And I intend to refer people to my blog to find this link on the ABA website to help them use LinkedIn better.

So, if you want to see the 14 tips for using LinkedIn created by the ABA, click here. This way I don’t have to incorporate all 14 tips into a slideshow and read them aloud (which is a no-no anyway).

That’s the view of one lawyer from sun-drenched Jupiter, Palm Beach County, Florida. I continue to be Marc Dobin.

Print Friendly, PDF & Email

Lloyds Commodities principals ordered to pay fines and restitution.

When we reopened Dobin Law Group in 2010 (then known as Marc S. Dobin, P.A.), we moved into an office suite setup in Jupiter. There were prior tenants in the space. One of the prior tenants was Lloyds Commodities. These were not luxurious quarters.

After we moved in, we inherited the Lloyds phone number. We would occasionally get a phone call asking how to send in account documentation. The people who called did not really seem to have much of a clue. And it didn’t make sense that they would be buying physical commodities. But it wasn’t my job to warn them. One thing always troubled me, though. I never like it when a business chooses a name that seems to have nothing to do with their business but everything to do with trying to earn credibility by being confused with another established business.

There was a Ponzi scheme in West Palm Beach, Pheonix Investments. It was accused of trading on the confusion between its name and Phoenix Mutual Funds. Eventually the Ponzi scheme unraveled and the mutual fund company sued Pheonix for unfair competition or something like that.

In this case, why Lloyds? How about subliminally convincing people that the business is associated with Lloyd’s of London? People don’t ask. And if they do, I have no idea what answer was given. But it doesn’t matter.

The Palm Beach Post reports that Lloyds and its owners (neither of whom were named Lloyd) were ordered to pay about $5 million in penalties and restitution. I doubt any of that money will ever be seen, but who knows.

Print Friendly, PDF & Email

FINRA Securities Arbitration statistics remain unchanged for 2013

I wrote last month that it was not looking good for the folks who advocate for an all-public arbitration panel.  But I knew I had to wait until the publication of the year-end figures to be sure.  And now I’m sure, at least for this year.  Here they are.  The percentages remain unchanged.  Nine “all-public” cases and five “majority public” cases were decided in December.  The results did not change the percentages.

I repeat.  This turned out to be window dressing.  Of course, there could be any number of factors that resulted in skewed results in favor or opposition to my assertion.  But the fact remains that the “win” rate for customers is statistically even regardless of the panel composition in the year 2013.  Keep in mind that, for the most part, these would be panels that were selected in 2012.

But I have said before, I do not draw huge conclusions from this.  There are too many variables to beat my chest and say “I was right” no matter how tempted I may be.  But the fact remains that the PIABA folks will now say that the system is unfair simply because it exists.  I’m reminded of the Black Knight in Monty Python and the Holy Grail.  So reminded, in fact, that I am putting it here. Make sure to click on the image to get the full clip.

black knight

When you hear or read someone say “Arbitration is still unfair, no matter what the statistics” just say in your head “I’ll bite your legs off.”

That’s the view of one lawyer in Jupiter, Palm Beach County, Florida. I’m Marc Dobin (and not the Black Knight).

Print Friendly, PDF & Email

Port St. Lucie broker pleads guilty for stealing from clients.

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.

Print Friendly, PDF & Email

FINRA arbitrator removed from panel for salty language.

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.

Print Friendly, PDF & Email

Welcome to Anthony Aiello at Laidlaw & Company (UK) Ltd, the latest cold call cowboy.

Today’s entrant in the cold caller race is Anthony Aiello.  Anthony hails from New York, of course, and works for Laidlaw & Company.

Anthony tried to remind me of a phone call we had “last April” where he supposedly gave me a stock recommendation.  He didn’t give me any such recommendation and we had no such conversation.

Interestingly, he claims to have notes where he wrote down that we spoke.  Even more interesting is that he didn’t work for Laidlaw then, he was with another firm.  He didn’t tell me “I was with another firm, then, maybe you remember that firm” or anything of that nature.  He just flat out told me about a conversation that didn’t happen.

It boggles my mind that FINRA allows these people to have licenses.  They’re so busy worrying about the big splashy headlines that they ignore the hand-to-hand combat that takes place over the phone all over the country.  Someone is training these cold-callers that it is OK to make things up during a conversation.  How is that proper?  Or do these guys (haven’t had a woman cold-caller yet) simply decide that the mark on the other end of the phone is too busy to remember what conversations they had 9 months ago?  Incredible.

As regular readers of this blog know, Anthony is not the first cold caller and I doubt he will be the last.  Maybe he’ll learn from this encounter and decide to make money in an ethical manner.  After all, he only graduated from college in May 2012.  I have socks with more experience.

That’s the “you interrupted my lunch for this?” view of one lawyer from Jupiter, Palm Beach County, Florida.  I’m Marc Dobin.  Don’t call me.

Print Friendly, PDF & Email