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Apr 19, 2010 2:45 am

So let's say this guy I know in the business received his first complaint in his career in the form of a civil suit filed in his county court??  The beneficiary of a trust is suing my friend, a cilent of his, his partner, their b/d and their business entity making all kinds of ridiculous claims.  The claimant never used the FINRA process, but I never knew this was an available avenue outside of FINRA arbitration, is it? 

Without sharing details, the attorney obviously has little to no experience in these matters as one of the claims is "failure to supervise" the activity of my friend's account....because my friend was the manager.  The remainder of the accusations are more outrageous and misinformed than this one, but also more serious.  Is this still a disclosure event even if the case is dismissed without merit?  I'm curious if anyone has knowledge or experience with something like this.  Thanks

Apr 19, 2010 4:44 pm

First off, I am not a lawyer and this is just my opinion... but "failure to supervise" isn't a outragoeus claim. I would think that any lawyer worth his salt would pursue this in the face of a negligence or worse from a rep, as the manager's job by definition is to supervise. I am a manager, and this is a real threat.

Secondly, and sometimes sadly, a lawyer representing the claimant will likely throw as much you know what, at the wall and everyone he can, to try and get joint and several liability, which sometimes can help ensure an award is paid, as the firm usually ends up paying it and then goes after the rep and/or others for contribution. Basically, FINRA or the court says I don't care who pays but someone better, likely the one w/ the $$$.

As far as the filing in a local court, as opposed to FINRA, I don't think that is possible. When a customer opens an account w/ a member firm, among other things, they have agreed that any disputes will be settled in the FINRA process. I am sure if the claimant can show fraud or misrep. regarding this not being disclosed he may get a court to rule in his favor and allow. Although either way it will likely be a disclosable (if thats a word) event, as he will be required to disclose it on his U-4 as opposed to the regulator helping him once they receive the complaint.

Again, no lawyer here. If you are lucky to get Bill S. to respond, he will likely dissent to much of what I said and explain the way things really

Apr 19, 2010 8:43 pm


Thanks for the response, I thought the same as you....however I didn't mean that "failure to supervise" was an outrageous claim by itself.  I'm also a manager and know all too well that charge is typically an automatic.  My point was he is the rep on the account, and the producing branch by definition he can't supervise his own account activity.  The firm supervises him.  Just an example of how the attorney seems to know "just enough to be dangerous".  

I thought the same thing regarding filing in a local court instead of FINRA, I would think this should simply be dismissed due to incorrect jurisdiction or something along those lines.....but I'd love to hear what the lawyer on this board thinks about the disclosure aspect.

It's like being arrested when you're innocent and the cop says "tell it to the judge".  You can beat the rap, but you can't beat the ride.

Apr 20, 2010 10:55 am

One thing I don't understand. I haven't seen a brokerage agreement without a binding arbitration clause in years (can't actually remember the last one). Why is this a civil court filing and not a FINRA arbitration? Can't his atty force it out of court?

Apr 24, 2010 1:21 pm

In my opinion, the statement that the claim was filed by a beneficiary of the trust, not the client, is most likely how arbitration was bypassed.  They would not have signed a binding arbitration/account agreement.

Jan 16, 2014 5:23 am

I’ve a similar situation where a relative of a client filed a consumer complaint against a financial advisor in a bank-brokerage. The bank actually intercepted an email from the relative to the FA which was very detailed. The bank retrieved all correspondence between the FA and two different set of clients which supported the claims made by the relative in the email (undue influence, conflict of interest, failure to disclose and fraudulent inducement.)

The Financial Advisor, by his own admission,'is getting a strike" against him by his employing bank-broker following the email which was excalculated as a consumer complaint. Investigation remains ongoing but the financial advisor complained to the client he manipulated that he’s “getting a strike” on his records. Can anyone please enlighten me if a strike means a complaint is filed or if is the strike only if misconduct has been substantiated? Also, if a bank has a pending ethic investigation against an employee, does the bank have a duty to report the incident to the SEC??