Here's A Twist!
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The following are snippets from an article, issued by a publication that might be considered a competitor to Registered Rep. I'm not posting the link, for fear of having it yanked. However, you may PM me and I'll email it to you.
IRVINE, Calif. - The U.S. Supreme Court is set to hear oral arguments Wednesday in a case filed by a former Merrill Lynch broker which will decide a key issue affecting securities class actions.
The former Merrill broker, Shadi Dabit of Norman, Okla., filed suit against Merrill Lynch & Co. Inc. of New York in 2002, several weeks after New York Attorney General Eliot L. Spitzer publicly accused Merrill of publishing misleading research on stocks Mr. Dabit and his clients owned.
Mr. Dabit brought claims under state law alleging breach of contract and fiduciary duty, and claimed that Merrill's misrepresentations damaged his business.
He sued on behalf of himself and all other Merrill brokers who from Dec. 1, 1999, through Dec. 31, 2000, allegedly refrained from selling Merrill-recommended stocks.
If the court lets Dabit's case proceed under state law, the industry says, it will open the floodgates to frivolous class actions.
The case is unusual because most class action securities cases are filed by shareholders alleging misrepresentation of earnings, not by employees claiming misrepresentation by an employer, as in Mr. Dabit's case.
Mr. Dabit, through his lawyer, Clell "Skip" Cunningham of Dunn Swan & Cunningham PC in Oklahoma City declined to provide details about his business.
"He lost substantial numbers of customers" due to Merrill Lynch's research, Mr. Cunningham said.
According to an exhibit filed in his case, Mr. Dabit and his clients owned a long list of technology and dot-com stocks. Some of those customers sued Merrill Lynch, and two were awarded at total of $338,000 by NYSE arbitration panels, which also ordered Mr. Dabit to reimburse Merrill for part of the damages.
Mr. Dabit filed for bankruptcy in February 2004. Through Mr. Cunningham, Mr. Dabit confirmed that his legal problems forced the filing.
Mr. Dabit, a paraplegic since birth, now is unemployed, Mr. Cunningham said.
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My opinion: It's about damn time for a case like this. I'm rooting for Dabit. You spend years cultivating a reputation, building a business, only to have your damn wire make the headlines (and it ain't the kind of headlines that make your business life easy).
Now, I know I don't know all the details. Heck, Dabit could have had 100% of all his clients' money in tech stocks. But I doubt that's the case, since The Supreme Court has agreed to listen to it.
It's high time for brokers to be able to extract damages from their wire, for illegal, negligent, etc, behaviors!
I do not think he will prevail, since any and all disputes would be subject to the arbitration clauses that all Rep sign when they sign their Form u4. I suspect that the Surpreme Court like any other court when throw his claim out to be arbitrated…my 2 cents
I don't think he'll win. It would open way to many doors. Brokers everywhere would start filing suits against their firms.
Employers have long had the right to sue employees for malfeasance or
to recover damages to the corporation caused by the employees actions.
As far as Arbitration goes, Arbitration clauses can’t and don’t cover
everything that’s actionable. I’d bet that if arbitration was the
answer, the lower courts would already have killed the case.
[quote=doberman]
According to an exhibit filed in his case, Mr. Dabit and his clients owned a long list of technology and dot-com stocks. Some of those customers sued Merrill Lynch, and two were awarded at total of $338,000 by NYSE arbitration panels, which also ordered Mr. Dabit to reimburse Merrill for part of the damages.[/quote]
I'd like to see him prevail in this, but the above causes me to wonder what his real role was if an arbitration panel found him liable too.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
I hope our resident legal scholar comments on this one. Bill?
I think we need to view our business as our own, even if in a
wire. We make the decisions on what to place in portfolios, and
if a portfolio is structured properly, it should not be weighted too
heavily in the Tech area. In fact, I would argue that the sector
allocations recomended by ML at that time we no more than 5-12% of a
portfolio. Following that, a portfolio/or reps business should
not be completely reuined for clearly poor research. I was not at
the firm at that time, but my guess is management was not writing the
tickets in the Focus 20 fund for the reps.
As for the firm being in the headlines…I agree that many reps,
perhaps not even following the ignorant research by ML at that time,
had their business seriously damaged. However, can a Martha
Stewart middle manager/sales rep sue Martha Stewarts company because
sales were slow during their press terror? Nope. I don’t
think it will stick. If you don’t like the situation, there are
plenty of options to move into, as all of the Indy promoters will
attest to (they do not need to do as much volume of busines to make
more money).
[quote=rightway]I think we need to view our business as our own, even if in a wire. We make the decisions on what to place in portfolios, and if a portfolio is structured properly, it should not be weighted too heavily in the Tech area. In fact, I would argue that the sector allocations recomended by ML at that time we no more than 5-12% of a portfolio. Following that, a portfolio/or reps business should not be completely reuined for clearly poor research. I was not at the firm at that time, but my guess is management was not writing the tickets in the Focus 20 fund for the reps. [/quote]<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
I think you make some good points, but the actions of people like Grubman and Blodgett (and not to pick on those two firms) hurt individual brokers, and it wasn’t about stock picks that were made on the up and up but didn’t pan out. Fraud was involved. The firms paid clients and paid the SEC but screwed the brokers. They should have a responsibility to bear for what they did to their own sales force.
[quote=rightway] As for the firm being in the headlines...I agree that many reps, perhaps not even following the ignorant research by ML at that time, had their business seriously damaged. However, can a Martha Stewart middle manager/sales rep sue Martha Stewarts company because sales were slow during their press terror? Nope. I don't think it will stick. If you don't like the situation, there are plenty of options to move into, as all of the Indy promoters will attest to (they do not need to do as much volume of busines to make more money).
[/quote]
Again, I don't completely disagree, but while the firms paid parties they injured (and via genuine malfeasance, not bad stock picks) and the SEC, they left brokers hanging out to dry.
In fact, after all the nonsense that happened in research offices and corner offices at the top level, I feel a slow burn whenever I hear some compliance geek babble on on about small potatoes stuff to brokers. I always wonder how they still have jobs given what they missed that REALL cost the firm money in massive fines and poor publicity.
In
fact, after all the nonsense that happened in research offices and
corner offices at the top level, I feel a slow burn whenever I hear
some compliance geek babble on on about small potatoes stuff to
brokers. I always wonder how they still have jobs given what they
missed that REALL cost the firm money in massive fines and poor
publicity.
AMEN TO THAT! THAT IS SO TRUE!