An irreverent Wall Street Blog

Magic Moments Dazzle In Legend-ary FINRA Customer Arbitration

July 27, 2018

There are many magic moments in our lives.  In FINRA arbitrations, not so many, but, that's not to say that even in the midst of a heated customer dispute we can't find magic. In a recent FINRA arbitration we start with four respondents, and then, almost magically, we end with one. We have a lawyer who says he has unrevoked authority to accept service on behalf of a respondent broker-dealer, but that firm lacks a physical address and the lawyer eventually withdraws as counsel for that apparently no-longer-existing client. Then we got named respondents who get dismissed. One named respondent files for bankruptcy. Then the whole mess ends with an award against the sole remaining respondent -- the brokerage firm that didn't appear at the hearing, whose maybe/maybe-not lawyer withdrew as its counsel, and which lacks a mailing address after it was apparently evicted. Who says their ain't no magic in this world? Why this arbitration is filled with many, many magical moments.


Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in February 2017,, public customer Claimant Romero, Jr. asserted violation of the New Mexico Uniform Securities Act; breach of fiduciary duty; violations of NASD Rules 2111, 2310 and 3110; violation of NASD Rule 3010; negligence and negligent supervision; and respondeat superior. The allegations are purportedly in connection with investments in Fusion IO, Inc., GSV Capital Corp., Horizon Pharma, Inc., Neptune Technologies and Bioresources, Inc., Nanosphere, Inc., OCZ Technology Group, Mankind Corp., Vringo, Inc., and others; corporate bonds, including: Synovus Financial Corp. and R.R. Donelly & Sons; and an investment in American BioCare Series A Preferred shares. Claimant sought $95,000 in compensatory damages plus punitive damages, interest, costs, and fees.  In the Matter of the FINRA Arbitration Between Andres Romero, Jr.., Claimant, vs. Aegis Capital Corp., Christopher Nicholas Cacace ,Anthony Fusco, and Legend Securities, Inc., Respondents (FINRA Arbitration  17-00452, July 20, 2018)

Respondent Legend did not submit a Statement of Answer or sign the Submission Agreement, and did not enter an appearance. 

Respondent Aegis did not submit a Statement of Answer or sign the Submission Agreement. 

Respondents and Fusco appeared pro se, generally denied the allegations, and asserted various affirmative defenses.

Unrevoked Authority

Although I often attempt to explain or condense legal matters for my readers, the recitation of various procedural matters in the arbitration are so bizarre and, frankly, are so well presented by the sole FINRA Arbitrator that I will present them as they appear in the FINRA Arbitration Decision and invite you to stroll through the brush and underbrush:

On May 8, 2017, Fusco's counsel, Lawrence R. Gelber, advised FINRA via email as follows: 

I have authority to accept service on behalf of Legend. 

Legend is no longer at 45 Broadway. It does not exist in physical form - it cannot be physically served. Legend has no physical address anywhere. 

The address on page two of your letter is NOT VALID for Legend. Legend was forced to vacate its offices for non-payment of rent. FINRA needs to correct its records. 

If you would like, I can email Legend's "custodian of records" - a former employee of Legend, but it would be absurd. 

Legend is not appearing in this action. (Emphasis in original). 

By another email submission on the same date, Mr. Gelber advised FINRA: "I was Legend's counsel and still have unrevoked authority to accept service." 

On February 20, 2018, Mr. Gelber advised FINRA that he withdrew as counsel for Legend and Fusco. 

The Arbitrator determined that Legend was served with the Statement of Claim and had notice of this arbitration case and the pleadings through Mr. Gelber, and is therefore bound by the Arbitrator's ruling and determination. 

On June 20, 2017, Claimant dismissed his claims against Aegis with prejudice. 

On April 28, 2018, Fusco filed for bankruptcy under the United States Bankruptcy Code. In accordance with these filings, all claims against Fusco are indefinitely stayed. Therefore, the Arbitrator made no determination with respect to the claims against Fusco. 

On May 7, 2018, Claimant advised FINRA that Cacace was dismissed without prejudice. On May 11, 2018, Cacace advised FINRA that he agreed to be dismissed without prejudice. 

So . . . you got all of that? Really??

An Existential Dilemma

Respondent Fusco has a lawyer. According to the FINRA Arbitration Decision, that lawyer is Lawrence R. Gelber. For some reason, which, frankly, escapes me, Gelber advised FINRA that he had authority to accept service on behalf of Respondent Legend despite the fact that the Decision states that Legend had not submitted a Statement of Answer or an executed Submission Agreement. Frankly, I don't see any indication that Gelber filed an appearance as Legend's counsel, so I'm not sure why the issue of his accepting service on that firm's behalf even came up. Notwithstanding my lack of understanding, the issue is set forth in the Decision -- so, yeah, it came up . . . supposedly.

Although Gelber apparently stated that he had "authority to accept service" for Legend, he also stated that "Legend is not appearing in this action." That sets up an interesting existential conundrum. A party is not appearing in an action, doesn't execute a prerequisite Submission Agreement, and doesn't file an Answer but a lawyer sitting at the hearing table says that he has "authority to accept service" for that missing-in-action party. Okay. Ummm . . . if that makes sense to you, wonderful. Me . . . I don't even know where to begin with all of that. 

Further, Gelber then states that Legend no longer exists "in physical form" and it no longer occupies the last known address to which FINRA has been sending letters.  It certainly brought a smile to my face when Gelber offered to email Legend's custodian of records but did so with the admonition that "it would be absurd." We then take the absurd to an even more extreme state when we learn that following Gelber's assertion in May 2017, that he had "unrevoked authority to accept service" for Legend, the lawyer subsequently notified FINRA in February 2018 that he had withdrawn as counsel for both Legend and Fusco. So . . . either Legend revoked the unrevocable or Gelber took matters into his own hands.

Perhaps out of annoyance or out of a sincere belief that the predicate proof had been demonstrated, the sole FINRA Arbitrator ruled that Legend had been served with the Statement of Claim and had notice of the arbitration and attendant pleadings "through Mr. Gelber, and is therefore bound by the Arbitrator's ruling and determination." Sure. That all makes perfect sense. Just don't ask me to explain how or why. And let's not even get into Respondent Aegis's and Respondent Cacace's dismissal or Respondent Fusco's bankruptcy! In any event, Claimant Romero proceeded only against Respondent Legend by way of a default proceeding. Claimant is going after a company that lacks a physical address. That should prove profitable in a magical way, right?

Award

To put this beast out of its misery, the sole FINRA Arbitrator found Legend Securities liable and ordered it to pay to Claimant $33,000.00 in compensatory damages plus $15,266.21 interest. 

Bill Singer's Comment

I can't wait to see how Claimant manages to collect on this one. And folks wonder why I am a staunch proponent of requiring FINRA to fund and maintain an anti-fraud fund to guaranty the payment of all compensatory damages to defrauded public customers? Consider this FINRA customer arbitration as Exhibit A. At least magic is in the air.

Permalink

Search BrokeAndBroker

Related Topics

Previous Entries

No Headlines Found

Tag Cloud

Bill Singer BrokeAndBroker FINRA Arbitration AWC SEC BrokerAndBroker Expungement Guest Blog Guest Blogger Aegis Frumento OBA Wells Fargo U5 BrokeAndBroker CRD InSecurities OHO Email Morgan Stanley Defamation U4 NAC ALJ Merrill Lynch BrokerCheck PST Supervision Whistleblower Statutory Disqualification Securities Industry Commentator Rule 3270 Suitability DOJ SDNY Promissory Note Rule 2080 Elderly Rule 2010 Willful WSP OIP Form U4 Wire Fraud Pro Se Rule 8210 EFL UBS Expenses RIA Form U5 Dodd Frank Stephen Kohn Business Expenses TRO Discretion Rule 1122 Bar Willfulness IRS Bank JP Morgan Fraud Discovery Wife Trump Ameriprise Husband NASD Bill SInger FAA Rule 3240 Borrowing Small Firm Conversion Supreme Court Rule 3280 Crypto Edward Jones Margin Wrongful Termination IRA Raymond James CCO Insurance 2Cir Estate Frumento Corrective Action Statement Outside Business Activities Stay Rule 12206 Mail Fraud Schwab arbitration Punitive Damages Tax LPL Promissory Notes Customer Bankruptcy Beneficiary Explained Decision TD Ameritrade Felony COVID Remand Citigroup Motion to Dismiss Options BrokeAndBroker.com Commissions Settlement Trust Case In Point OWB Injunction CFTC ACQ Board DCCir Rule 4511 OTR Initial Decision Retaliation Blockchain Sanctions Rule 3040 Tax Liens Ponzi Rule 2510 Wall Street Motion to Vacate Burris Due Diligence Forgery Spouses 9Cir Rule 4530 Discrimination Jurisdiction Eligibility Rule Unauthorized Discretion Reg SP Personal Expenses Unsuitability Offer of Settlement Rule 12200 Solicitation Outside Business Activity FBI Mandatory Arbitration SRO Insider Trading Bank of America Rule 3010 Compliance Failure to Supervise Checks NYSE Barclays Annuities Manifest Disregard ETF CRS Goldman Sachs Private Securities Transaction Divorce Disgorgement Loan Dissent FINRA Board Rule 3110 10Cir Class Action Cease And Desist PCAOB Fiduciary Conspiracy email Trustee Board of Governors Impersonation Power of Attorney Reimbursement Rule 9552 Credit Card IAR expungement VA Broker Protocol Unfair Competition Spoofing Spouse Cryptocurrency Customer Complaint Liens AML Zipper Emails Annuity Away Account T&P Tax Lien JPMorgan Complaint Indemnification Retirement Wey Disclosure Lucia SDFL Kokesh Due Process POA BD Breach of Contract Appeal MC-400 4Cir Lien Bitcoin Rule 12904 Willfully Coronavirus Public Interest Unauthorized Trading Postponement Racism BOP Severance REIT 3Cir Indictment Elder Abuse Securities Fraud Vacatur Fees Antitrust HFT Brummer Exhaustion of Administrative Remedies Dakota Securities Rule 12805 CMA Net Capital Test Motion to Confirm Rule 2111 Signature Covid Hilton Weiner Whistleblowers Wire Rule 3050 WSPs insecurities guest blogger guest blog aegis frumento Rule 2150 Employment Sexism Whistleblowing Statute of Limitations Marijuana PNC RR Suspension Gensler NASDAQ Deceased Widow Private Securities Transactions Examination Bureau of Prisons Money Laundering OIG BrokeAndBroker.com Blog Robinhood Stifel Nicolaus Sanction Guidelines Deutsche Bank PIABA Loans Bonus Rule 2081 Apple Stifel Signatures DNJ Non Solicitation Audit Will DOL Puts Bonds Leggett Puerto Rico Rule 13200 Preliminary Injunction Confidential Information Enforcement 11Cir Botkin Rule 4513 Misdemeanor Charles Schwab Self Regulation Great Recession OSHA Elder Fraud Mortgage TOD Absolute Immunity JPMS Margin Call Unjust Enrichment Mutual Funds CPA Membership Continuance Credit Suisse Statutory Disqualification Committee Hacking Registration Commission Unsuitable Small Firm Governor NoCA Website Rationale Diversity 1Cir supervision NDCA TheBlot Exam Pennystocks Standing Appointments Clause Arbitraiton Undisclosed Settlement ADA JPM Test Center Passcode BrokeAndbroker Inability to Pay RBC money laundering Mother IPO Finra Election Away Accounts Scottrade Immunity Rule 2210 Testimony Real Estate Robert Cook Annual Compliance Questionnaire AAA TCR Feigenbaum Spoliation Cannabis Statement of Corrective Action WB-APP Rule 13805 Waiver 6Cir Trade Secrets Written Supervisory Procedures 9/11 securities industry commentator State Actor E*Trade Rule 12504 Concentration Reg S-P Bandimere BrokeandBroker Extraordinary Cooperation Rule 9554 CEO Excessive Trading Sexist Affiliate Variable Annuities Michael King Biden Variable Annuity Hurry Sarbanes Oxley Form ADV brokeandbroker FINOP Compensation Imposter Michael King Associates Tortious Interference Solicited Irreparable Harm Restitution Johnny Burris Newman Superior Court FMLA Unsolicited DMD NRF Wachovia Facebook Star Wars Series 7 Medical Condition BrokeAndBroker Bill Singer FINRA Small Firm Rule 12212 Termination Fidelity Hester Peirce DDC Churning Conflict of Interest EDNY Ethereum Administrative Remedies Circuit Court Taxes Confidentiality Trading Platform Customer Information Non-Solicitation Subpoena Default Motion to Compel Sharemaster Financial Professionals Coalition Beneficiaries Research Sexual Discrimination ICO Talman Harris High Frequency Trading Pennystock Self Reporting Constitution Continuing Education Life Insurance Scottsdale 10b-5 Customers McDuff Self Directed PAQ Kon Social Media Marines Vietnam Marine Corps Honorarium Whitman Relevant Disciplinary History Consent Order Ride the Thunder Employment Agreement VIX IM Mutual Fund Service Hugh Hewitt Funds Rule 3030 Wanger Extraordinary Circumstances Stipulated Award Internet Rule 3310 Flash Crash Boycott Saad RMBS Hearing Sexual Harassment Government Accountability Project Information NSF SunTrust Cheating Check Kiting Guitron Obstruction RICO Lawyers Debit Card Wedbush Yesenia Guitron Testing ATM 5Cir Probate Respondeat Superior Privilege FNMA FINRA AWC Private Placement Dementia Scholander Interactive Brokers FOCUS Layering Nondisclosure Annual Audit Falsification 17a-5 Check JP Morgan Securities Guest Bloggers EEOC Lawyer Morgan Stanely Federal Reserve Chevron Son Revocation Capital Gains securities fraud Conflict SP Pension Prudential Oral Discretion Shah Gilani Slander Charity Penalty OWWP Hedge Fund Confirm Disciplinary History wire fraud Attorneys Fees WBAPP GameStop mail fraud Amazon Client Information Gamification Regulation SP Outside Counsel Fiduciary Duty Rory Flynn Acosta DCO Rule 1210 Blackbook Forex Executor Relevant Transamerica Liquidation NY Life Res Judicata Offset Puerto Rico Bonds Permanent Bar ARS Form TCR CDO SD FCI Rule 13504 Death Peirce ACH Joint Account Over Concentration WhatsApp Tesla FCI Beaumont FAP Zoom Texting Newport Coast Securities LLC Jennifer Tarr Obstruction of Justice Christian Stanley Rule 21F Arbitration Civil Rights Unauthorized Practice of Law Taft Correctional Institution Cold Spring Advisory Group Reverse Life Insurance Lehman Third Party Vendor Deferred Compensation Bear Stearns Oppenheimer Rule 13104 MSSB Elder Law 40 Act Withdrawals Rule 2430 Expert Witness Leveraged ETF Google OCIE Crime Embezzlement Control Person Non Solicit Securities America Libel Pruco Time And Price Commodities Fraud Verbal Discretion For Cause Book of Business First Amendment fraud NYG Capital Turnover EDPA bill singer Counterclaim Subject Matter Jurisdiction Tennis Court Mistake Trade Practices Oilpro Charge Rule 13904 Rule 12104 Calls Cantor Fitzgerald Allocation Compliance Questionnaire Trading Jay Clayton Retired Woman With Cane 10b-10 Constructive Discharge Rule 3210 Johnson Purshe Kaplan DAO Powell wrongful termination AWC. FINRA FINRA Arbitration Teleconference Finder\'s Fee Rule 12203 Hotel Jarkesy Nationwide ESOP Kierkegaard Motion Reason for Termination LIBOR AXA YouTube Administrative Process SDOH Non-Disclosure ESG CE Fernandez Trader Tax Advice Pham Panama Telephone Vungarala Cherry Picking Expulsion Lorenzo Nicolas Corcione Fundacion Nicor Ten Commandments Credit Cards SDCA Retroactive Bar Collateral Bar Municipal Advisor Fine Financial Disclosure Retroactive Pershing GME FNI Media sexism NRSRO DRS NFT Section 1332 Exception Reports Schottenstein Bartko FINRA Foundation Negligence Private Placements ALJ Grimes Third Party Beneficiary Transparency JOBS Act Last Known Address QuadrigaCX Mantar GAP Rule 21F-17 In House Counsel CD NYAG Communications Undertaking expenses Promoter SLUSA Accounting JAMS In Connection With Deceased Customer MAP reimbursement TSSB HSBC false statements AMC Rule 13206 Reg SHO DMCA Gross Ruder Task Force Confidential Audit Committee Sharing Agreement Books and Records Kiting Rule 144 VXX Corporate Governance Motion to Compel Arbitration Back Dated Equity ACT! Tysk Altered Apartment Particularity Declaratory Judgment Rule 13212 Lek Rule 13201 Ethics Court of Appeal Orders Daspin Rule 2140 APA Title VII Motion to Exclude Section 206 PSRO Joint Production Discharge Exception Report Salman Stephen A. Kohn Self Regulatory Organization Investment Advisers Act Kent Transitional Bonus UIT MSPB Ruemmler Production Bonus Burden of Proof Notice Alcoholism Jury Instructions Harris finra Confirmation NPI Sterne Agee ALJ Foelak NMS Covid-19 Shotgun Pleading Risk Romer Article V Motiion to Acquit Fraudulent Inducement Grievance LOA annuities Wires Crowdfunding Hacker Confidential Customer Information defamation Rule 12511 Bob Dylan Data Meals Office of Special Counsel Escrow Clearing Firm Bill singer Unauthorized Trades Stipulation Reasonable SIFMA S&P Microcap elderly Motion to Postpone Electronic Communications Fidelity Brokerage Services Public Arbitrator Dostoevsky Bezos Municipal Bonds Berthel Fisher ETFs Expert EDVA FOREX Currency CNBC Income Capitalism No Show Series 79 Guardian Punitive Cryptocurrencies PN Exotic ETF Clayton Lexicon Reg D Ecuador Production Hayden Newbridge MDLA Daughter Witness Tampering JPMorgan Chase NYLIFE Non-Solicit Rule 420 Voya Principal Quasi Governmental Exemption Non Compete College Solomon Day Trading Disability Regulation Elon Musk Restaurant Private Actor Disparate Treatment Abstention AI Chief Compliance Officer Willfull Nietzsche Bequest Rule 2330 Rule 9216 Unregistered Fee Conflicts Rule 1031 Game of Thrones whistleblower Initials Perjury Investment Adviser Howey Harassment Vaccarelli Led Zeppelin Broke And Broker Judgments Traders Exhaustion Doctrine SIE Success Fee TradeStation ADR