Legal Issues

If you read as many FINRA decisions as Bill Singer does, you’ll come across some real doozies.

Enter Nico Phillips, a client of J.P. Morgan Securities. Mr. Phillips, explains Singer on his BrokeAndBroker blog, hauled Chase Investment Services Corp. before FINRA on allegations of breach of fiduciary duty, misrepresentations, omission of facts, failure to supervise, negligence, and failure to execute. Phillips wanted $200,000 in damages; FINRA rejected the claim outright.

Singer quotes from FINRA’s decision, redacting Phillips’ advisor’s name:

“The Claimant did not allege, nor can the Panel recognize, any investment related sales practice violations. The Claimant testified that he gave unsolicited instructions to his advisor, REDACTED, directing REDACTED to liquidate positions in his account and to transfer proceeds from said liquidations into his checking account. REDACTED followed the instructions of the Claimant. Claimant further testified that he alone subsequently depleted the funds that were transferred into his checking account over a short period of time.”

Singer comments: “Imagine suing your banker because no one informed you that by writing a number of checks against your balance that you could wind up depleting the funds in your account or generate an overdrawn debit balance.”

In addition to dismissing the case, FINRA recommended the action not appear on the advisor’s Central Registration Depository record, notes Singer. He adds: “Frankly, I wonder why a Counterclaim citing a frivolous and baseless lawsuit was not filed against the customer — and I’m wondering whether you could concoct a more convincing case upon which a FINRA Arbitration Panel would be justified in making a financial award.”

Read more here.

Other stories featuring commentary from Bill Singer:

If an investment sounds too good to be true…

Finally, common sense from the SEC (2013)

SEC report called “a sham” (2011)

Originally published on Advisor.ca

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