Category: FINRA rulings

4th Circuit Further Defines A “Customer” Under FINRA Arbitration Rules

Following its broad ruling in UBS Financial Services v. Carilion Clinic, 706 F.3d 319 (4th Cir. 2013), the 4th Circuit has issued two recent decisions that somewhat lessen the impact of the UBS holding. In UBS, the court held that a customer of a FINRA firm is anyone “not a broker or dealer, who purchases …

Read More 4th Circuit Further Defines A “Customer” Under FINRA Arbitration Rules

FINRA Hits Lincoln Financial With Failure to Supervise Concerning a Ponzi Scheme

Lincoln Financial Securities Corp. recently settled with FINRA concerning supervisory deficiencies over a now-deceased rep (Kenneth Wayne McLeod) who purportedly ran a Ponzi scheme targeting retired government employees (Department of Enforcement v. Lincoln Financial Services Corp. – Case No. 2010025074101). A copy of the FINRA AWC can be accessed here: (FINRA AWC). FINRAs case is …

Read More FINRA Hits Lincoln Financial With Failure to Supervise Concerning a Ponzi Scheme

Herskovits PLLC Submits Comments to FINRA Proposed Rule on Recruitment Compensation Practices

On January 30, 2013, we sent FINRA a comment letter concerning the controversial proposed rule which would require disclosure of all “enhanced compensation” – forgivable loans, up-front bonuses, back-end bonuses, and the like – to customers. For those opposed to the proposed rule, the comment period is open until March 5, 2013. The text of …

Read More Herskovits PLLC Submits Comments to FINRA Proposed Rule on Recruitment Compensation Practices

Courts Lining Up in Favor of Broad Definition of Customer Under FINRA Rules

Last week, the U.S. Court of Appeals for the 4th Circuit issued a favorable ruling on the arbitrability of suits against FINRA members. Traditionally, under FINRA Rule 12200 any “customer” may request arbitration of a dispute with a FINRA member. UBS and Citi argued that Carilion was an issuer of securities, not a customer, and …

Read More Courts Lining Up in Favor of Broad Definition of Customer Under FINRA Rules

FINRA Arbitrators Start Getting Tough With Discovery Abuses

Two recent FINRA arbitration awards highlight increased focus by FINRA arbitrators concerning discovery abuses by litigants. FINRA’s rules require cooperation of the parties in discovery (Rule 12505) and specifically empower the arbitrators to issue sanctions for lack of cooperation, failing to comply with the discovery rules, or frivolously objecting to the production of documents or …

Read More FINRA Arbitrators Start Getting Tough With Discovery Abuses

FINRA Provides Guidance for Supervisory Review of Email

FINRA recently released an Acceptance, Waiver and Consent signed by Deutsche Bank Securities, Inc. (FINRA Matter No. 2010023096302). The AWC is instructive because it speaks to supervisory review of electronic correspondence and should be considered by broker-dealers when crafting a lexicon-based search system for electronic correspondence. Background Facts Deutsche Bank’s Private Client Services division has …

Read More FINRA Provides Guidance for Supervisory Review of Email

Fidelity Wins Against Morgan Stanley in a Non-Protocol Solicitation Case

In Fidelity Brokerage Services LLC v. Morgan Stanley Smith Barney LLC and Brian Wilder (FINRA Arbitration No. 11-03937), a FINRA arbitration panel found against respondents and annexed a 25 page Arbitrators’ Report to the Award which excoriated respondents for misappropriation of trade secrets (Fidelity’s customer list) among other violations. The Award stands out for various …

Read More Fidelity Wins Against Morgan Stanley in a Non-Protocol Solicitation Case