More FINRA Follies

A few more examples of FINRA's army of miscreants have come my way, and if they were not so ruinous for the investors who lost money with these criminals who are licensed to steal, the interaction between the regulator, the brokers and the customers would be worthy of a Mel Brooks movie. I could write a book about this stuff. Unfortunately, it would be longer than Gibbon's Decline and Fall of the Roman Empire, and I don't have that kind of time.

One FINRA enforcement action came my way, and this being public information, I looked up the broker's history. Like the fellow I wrote about a few months ago who was finally barred from the industry after a career spanning 15 years of theft, this guy's been at seven bucket shops in his eleven year career. His first run in with the “regulators” was for a complaint filed in 2009 for $100,000 in damages, settled for $75,000. In 2013, he was nailed for unauthorized trading, which he of course, denied. But the whopper is the small matter of an unpaid tax lien from the IRS, for over $400,000. Now, all sorts of well meaning and honest people can get caught in a sling with the IRS, especially after the financial debacle. However, it would appear to this observer that if you owe the IRS over 400 Large, that might not be due to corporate downsizing. His U-4 has a few civil judgments against him as well, which he claims never even heard of before FINRA helpfully notified him about them. He's still employed by his seventh firm, because good man that he is, he dutifully informed FINRA about his tax lien. They like a man who follows regulations.

Another one I found almost by accident, and just for laughs, I decided to look up the broker's history. And oh, there is much to laugh about. This one's been in the business 18 years, on his eighth firm, and his U-4 takes a bit of time to load, since there's so much to report.

Here's a partial list:

2001: Unsuitable transactions, settled for $9500 for a complaint of $99,739.19. (Guess the plaintiff added postage.) Broker Response: "SETTLED FOR $9500.00. THIS ITEM SHOULD BE ARCHIVED AT THIS TIME."

2014: Churning, breach of fiduciary duty, negligence.... settled for $50,000 for a complaint of $100,000. Broker response: "THE CLIENT APPROVED OF ALL TRADES AND WAS AWARE OF ALL INVESTMENTS AND STRATEGIES USED IN HIS ACCOUNT. THE LOSSES IN HIS ACCOUNT CAN BE ATTRIBUTED TO THE MARKET LOSS OF 2 STOCKS."

2014: Churning, excessive commissions. Settled for $6500 on a $20,000 complaint. Broker response: "DENIES ALL CLAIMS MADE BY CLAIMANT AND CONTENDS THAT CLAIMANT KNEW OF ALL TRANSACTIONS AND COSTS ASSOCIATED WITH THE TRADES AT ALL TIMES."

2014 again: Churning, excessive commissions. Settled for $85,000 for a $100,000 complaint, a miraculous settlement considering FINRA's entire arbitration system is rigged in favor of the broker dealers. Broker response: ”DENIES ANY WRONG DOING AND CONTENDS THAT CLAIMANT WAS AWARE OF AND APPROVED OF ALL TRADES IN THE ACCOUNT."

2014 again: Churning, excessive commissions, yadda yadda. Settlement of $41,500 on $453,000 request for damages. Broker response unintelligible.

2014, “Misunderstanding" Margin account;.simply settled for what the customer asked: $20,000. No comment.

2015: Performance issues where client had losses of over $50,000 on an equity transaction. Broker response: "CLIENT STILL HOLDS AN ACCOUNT WITH REGISTERED REPRESENTATIVE, CLIENT STILL HAS CONTINUED TO INVEST AND DO BUSINESS WITH REGISTERED REPRESENTATIVE."

The responses are there because on a U-4, the broker is permitted to add a comment of his own in reply to the dispute, and the funny thing about these notes is that even if the client was awarded $400,000 in damages, plus interest and legal fees, the broker always swears he was not at fault. For some odd reason, I have yet to see ONE registered representative say “Yes, I churned the account of this 97 year old, and that is why my firm paid her $452,000 in settlement,” or, “I put this retired librarian's life savings in penny stocks and all of the firms went bankrupt and I left her destitute, and that is why my firm came up with a $275,000 settlement after years of arbitration.” How generous of these investment professionals to give away hundreds of thousands of dollars when they did nothing wrong! Why, I can't imagine why the industry has the reputation it does with such altruistic people working in it.

And of course, these people, despite complaint after complaint, are allowed by the sanctimonious frauds at FINRA to keep plying their trade for years. And almost no one has called them on it. That may finally change soon.