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Former National Securities Corp President/CEO Sues Firm In FINRA Expungement Case
February 12, 2019
In a recent FINRA expungement arbitration, we find FINRA member firm National Securities Corporation being sued by none other than its former President/CEO, who ran the place for some 16 years. As part of the absurd legal fiction that drives FINRA's expungement process, the former head honcho was forced to sue his former firm in an effort to get a customer complaint removed from his industry record. That complaint was the only apparent blot on a three-decade career in the biz. National didn't put up much of a fight over the requested expungement, but the firm appeared in quite a lather over being forced to pay Claimant's fees and costs of the proceeding. As it turned out, the assessed fees/costs against Claimant were a not-so-whopping $150.
Case In Point
In a FINRA Arbitration Statement of Claim filed in September 2018, associated person Claimant Goldwasser sought an expungement of a customer complaint. Also, Claimant requested $1 in compensatory damages, which monetary demand was withdrawn at the close of the hearing. In the Matter of the Arbitration Mark Harry Goldwasser, Claimant, v. National Securities Corporation, Respondent (FINRA Arbitration Decision 18-02579)
http://www.finra.org/sites/default/files/aao_documents/18-02579.pdf
Respondent National Securities Corporation took no position on Claimant's request for expungement and did not object to Claimant's requested relief but requested that Claimant pay all forum fees and costs. Although notified, the public customers did not contest the requested expungement or participate in the hearing.
Unsettling Settlement
At this point, things get a bit odd. According to the FINRA Arbitration Decision:
In contrast to that somewhat nebulous characterization of the missing Settlement Agreement, consider that FINRA's online BrokerCheck as of February 12, 2019, asserts under the heading "Customer Dispute - Settled" that National Securities Corp. was served with FINRA Statement of Claim 11-00262 on January 31, 2011, which alleged "BREACH OF SUPERVISORY DUTY" and sought $3,859409.52 in damages. That FINRA Arbitration settled on August 11, 2011, for $1,150,000, and Goldwasser is reported to have not contributed to that settlement. Appended to the FINRA BrokerCheck disclosure is this statement from Claimant Goldwasser:The occurrence arises from FINRA Case #11-00262, served on 1/31/2011, and disposed of by settlement on 8/11/ 2011. Due to the age of the settlement, neither party in the instant matter were able to provide me with the Settlement Agreement or complaint for review. Both parties asserted that they had searched for the documents without success. The Arbitrator noted that the settlement was not conditioned on the customer not opposing the request for expungement. The Arbitrator also noted that Claimant did not contribute to the settlement amount.
I WAS SOLELY NAMED AS A RESPONDENT IN THIS MATTER DUE TO MY CAPACITY AS CEO OF THE FIRM. I HAD NO INVOLVEMENT AS EITHER A REGISTERED REPRESENTATIVE OR SUPERVISOR WITH RESPECT TO CLAIMANT'S ACCOUNTS. THE SUBJECT BROKERS WERE NOT NAMED AND NO LONGER AFFILIATED WITH THE FIRM WHEN THE CLAIM WAS FILED. THIS MATTER WAS SUBSEQUENTLY HANDLED AND RESOLVED THROUGH THE FIRM'S ERRORS AND OMISSIONS POLICY, AND I DID NOT CONTRIBUTE ANY FUNDS TO THE SETTLEMENT.
Not Just Another Shlub
The sole FINRA Arbitrator recommended expungement pursuant to a FINRA Rule 2080 finding that Goldwasser was not involved in the alleged investment-related sales
practice violation, forgery, theft, misappropriation, or conversion of funds. The Arbitrator offered the following rationale:
During the hearing Mr. Goldwasser testified credibly that he joined National Securities Corporation in 2000 as President and became CEO in 2002. He remained as such until his voluntary departure in 2016. His responsibilities involved building the business and dealing with the financial crises of 2008/2009. He dealt with the effects of 9/11 because the firm's offices were across from the World Trade Center.From late October 2010 until May 2011, Mr. Goldwasser was an absentee due to serious health problems.He had no personal clients and did not act as an individual broker. There were four levels of supervision of brokers below him. Immediately below was the Office of Chief Compliance Officer and General Counsel. The latter had authority to settle claims. He was not aware of the customer's claim at any time and only learned of this occurrence recently. Respondent did not contradict any of Mr. Goldwasser's testimony. . . .
Bill Singer's Comment
Claimant Goldwasser was employed at National Securities from 2000 until 2016, and served as that firm's President and Chief Executive Officer. As set forth in the FINRA Arbitration Decision, during his time at the helm, Goldwasser's:
responsibilities involved building the business and dealing with the financial crises of 2008/2009. He dealt with the effects of 9/11 because the firm's offices were across from the World Trade Center.From late October 2010 until May 2011, Mr. Goldwasser was an absentee due to serious health problems. . . .
Putting that 16-year resume into perspective, Goldwasser helped keep National Securities alive after both 9/11 and the Great Recession. Further, during his 16-year tenure from 2000 to 2016, Goldwasser was purportedly seriously ill for some seven months spanning 2010/2011 but returned to manage the firm for another five years. If nothing else, it would seem that the folks at National sorta owe this guy their jobs. Consequently, it struck me as petty and cringe-worthy to learn that in response to its former President/CEO's request for an expungement and $1 in damages (which was withdrawn at the close of hearings) that National:
requested that the arbitration panel direct Claimant to pay all forum fees and costs, including any member surcharges, incurred in this proceeding.
The pettiness of National's request to shift all fees/costs/charges into Goldwasser's pockets is underscored by the disclosures in the FINRA Arbitration Decision that Claimant Goldwasser was assessed by FINRA or the Arbitrator a $50 Initial Claim Filing Fee and $100 in Hearing Session Fees. In its own right as a FINRA member firm, National was assessed a $150 Member Surchage. Given Goldwasser's purported contribution in keeping National alive during some tough times, you wouldn't think that his former firm would choke on a lousy $150 assessed against Goldwasser. Then again, if nothing else, Wall Street is about "what have you done for me lately."
FINRA's BrokerCheck further discloses that during Goldwasser's 32-year industry career at 10 different FINRA member firms, the customer complaint at issue in the FINRA expungement was the only disclosure on his record. On the other hand, let's not lose sight of the fact that the complaint , alleged breach of supervisory duty, sought $3,859409.52 in damages, and settled for $1,150,000. Speaking of other hands, National Securities' regulatory record during Goldwasser's tenure was not without problems. For example, only the year after Goldwasser's departure, in "Wall Street's self-regulator blocks public scrutiny of firms with tainted brokers" (Reuters / June 12, 2017) https://www.reuters.com/investigates/special-report/usa-finra-brokers/ the investigative report alleged in part that:
FINRA has fined National at least 25 times since 2000. As of earlier this year, 35 percent of National's 714 brokers had a history of regulatory run-ins, legal disputes or personal financial difficulties that FINRA requires brokers to disclose to investors, according to a Reuters analysis of FINRA data.. . .National is among 48 firms where at least 30 percent of brokers have such FINRA flags on their records, according to the Reuters analysis, which examined only the 12 most serious incidents among the 23 that FINRA requires brokers to disclose. That compares to 9 percent of brokers industry-wide who have at least one of those 12 FINRA flags on their record.Stockbroker fined and suspended for real-estate management outside business activities In the Matter of John Kasel, Respondent (FINRA AWC)Stockbroker Wins Expungement of Customer Complaint Settled for $100,000 In the Matter of the Arbitration Between Dominic Fredo Galati, v. TD Ameritrade, Inc., Respondent (FINRA Arbitration Decision 18-03114)