NASDR Dodges Disciplinary Referral of Dean Witter

The NASDR appears to have done nothing with a disciplinary referral it received from an arbitration panel more than a year ago over Dean Witters refusal to follow customer instructions to transfer accounts.On Aug.26, 1997, NASDR arbitrators filed the disciplinary referral as part of an award given to former Dean Witter broker Robert Zielke (see Nov. 97 RR, Page 90). When Zielke had moved to Bear Stearns,

The NASDR appears to have done nothing with a disciplinary referral it received from an arbitration panel more than a year ago over Dean Witters refusal to follow customer instructions to transfer accounts.

On Aug.26, 1997, NASDR arbitrators filed the disciplinary referral as part of an award given to former Dean Witter broker Robert Zielke (see Nov. 97 RR, Page 90). When Zielke had moved to Bear Stearns, Dean Witter got a temporary restraining order (TRO) from an NASDR arbitrator prohibiting Zielke from contacting customers. But Zielke aiready had some transfers in the works. Citing noncompete language in Zielkes training agreement, Dean Witter refused to transfer accounts expressly ordered by 42 of Zielkes customers.

Refusal to transfer customer accounts is a violation of NASD Rule 11870. Under the rule, a firm must transfer an account within three business days when a customer gives written notice. It can take exception to the transfer, but must promptly resolve the exception. The rule specifies what constitutes an allowable exception. A firm cant claim an exception based on a broker failing to follow a noncompete agreement or having a TRO in place.

Zielke initially argued his case in court. An NASD attorney was present during testimony in which the judge took exception to Dean Witters interpretation of Rule 11870. Dean Witter argued the customers instructions could be ignored.

The arbitration panel awarded Zielke $20,000 in punitive damages and $10,000 in attorneys fees The panels disciplinary referral asked NASD District 8 in Chicago to investigate the failure of Dean Witter and Scott Crawford (branch manager in Chicago at the time) to process the ACATs transfers of customer accounts ... after Feb. 7, 1997, after the injunction was removed. The investigation should determine whether there was a violation of the Rules of Fair Practice, the panel said.

In a Sept. 3, 1997, letter to NASD District 8 director Carlotta Romano, Mark Nowicki, District 8 senior attorney, asked her to report to him on any action she took.

Thats where the story appears to end. Zieike says he has never been contacted by anyone at the NASDR. Nowicki referred questions about the case to Romano, who didnt return calls. An NASDR spokesperson says the case was referred to another SRO to look into. The NASDR would not specify which SRO that was. An NYSE spokesperson says there is no record of an enforcement referral made by the NASDR.

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