Former Associated Persons Slam FINRA Member Firms in Arbitration
In a FINRA Arbitration Statement of Claim filed in October 2007 and amended in August 2008, Claimants asserted causes of action forFailure to Transfer IRA Account; Unpaid Commissions; Breach of Contract; and Violation of FINRA Rules.
In the Matter of the Arbitration Between Keith J. Steidle, Roderick T. Norman, and Michael S. Astashkevich , Claimants, vs. Granite Securities. LLC. Obsidian Financial Group, and Princor Financial Services Corp., Respondents (FINRA Arbitration 07-02912, June 25, 2010),Claimant Steidle sought at least $90,000 in unpaid commissions and an order requiring Respondents to process his ACAT forms; Claimant Norman sought at least $9,000.00 in unpaid commissions; Claimant Astashkevich sought at least $7,500 in unpaid commissions; and Claimants also sought pre- and post-judgment interest, forum fees, attorneys’ fee, and expenses.
At the close of the FINRA Arbitration hearing, Claimants sought$93,287.39 in compensatory damages, $59, 029.05 in attorneys’ fees; $10,339.76 in interest; and $1,475 in costs.
Respondents generally denied the allegations and asserted various affirmative defenses.
In September 2008, the FINRA Arbitration Panel granted Respondent Princor’s Motion to Dismiss.
In April 2010, Claimants filed a Motion for Sanctions. The Panel subsequently granted the Motion and ordered Respondents to pay Claimants a $10,000 sanction (jointly and severally liable) to compensate them for their costs in repeatedly pursuing discovery. In relatively harsh language the Panel noted that:
Respondents evidenced throughout this arbitration, from the filing of this claim to the hearing, a complete lack of cooperation and also exhibited a lack of respect for the arbitration process.
Moreover, the Panel found: Respondents jointly and severally liable to Claimant:Steidle for $82,653.41 in compensatory damages, $9,182.56 in pre-judgment interest, plus post-judgment interest at the rate of 1.5% from June 25, 2010; Norman for $8,027.49 in compensatory damages, $873.80 in pre-judgment interest, plus post-judgment interest at the rate of 1.5% from June 25, 2010; and Astashkevich for $2,606.49 in compensatory damages, $283.40 in pre-judgment interest, plus post-judgment interest at the rate of 1.5% from June 25, 2010.
The Panel further found Respondents jointly and severally liable for $59,029.05 in Claimants attorneys’ in accordance with the terms of the operable Registered Representative contract; and $1.475.00.in costs
BILL SINGER’s COMMENT: I recently authored a Registered Rep Magazine column: FINRA Honor and Principle, http://registeredrep.com/securities_law/compliance/finance_finra_honor_principle/index.html, in which I discussed the case of a registered person who withheld his member firm's share of his fees (10 percent share equalling $5,150). FINRA charged him with violating then NASD Rule 2110: Standards of Commercial Honor and Principles of Trade, which stated that “A member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.” The individual settled FINRA's regulatory case by agreeing to a Bar.
In discussing the case, I noted the following:
[D]oes FINRA ever hear about one of its member firms doing something dishonorable or unprincipled when it comes to its registered representatives? Am I the only industry lawyer who has heard repeated complaints about brokers being short-changed, underpaid, jammed up, and otherwise screwed by their employers. . [[T]he diligent cops at FINRA have more important things to do. There is honor and there are principles when it comes to FINRA member firms, but it's a tad different when registered reps are involved.
I applaud the Steidle FINRA Arbitration Panel for its ruling and for imposing a $10,000 sanction because of the member firms' lack of cooperation and respect. What I'm not understanding is whether this same Panel referred the matter to FINRA for a regulatory investigation. Given that the Panel found in favor of the former-employee Claimants, and given the Panel's stinging rebuke of Respondents conduct during the arbitration process, I'm not sure why this would not have been sent over to FINRA's regulatory side.
Just in case the Arbitrators did not make such a referral, I have taken the initiative in that regard. I have forwarded a copy of this article to FINRA's Office of the Whistleblower with a request that they investigate the issues in this arbitration.
Also, see this recent similar case that resulted in another referral to FINRA's regulators by BrokeAndBroker.com: http://www.brokeandbroker.com/index.php?a=blog&id=461