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Wells Fargo Promissory Note Victory Goes From FINRA Sublime to SEC Ridiculous
March 4, 2019
Among the more common questions asked of me as a Wall Street lawyer is the one that starts with something along the lines of: so, you're like a lawyer-lawyer, right? I mean what I tell you is confidential, right? So . . . just between us, like, you know, just askin' and all, but, what's the worst that could happen to me if I tell my former employer to shove the balance due on my promissory note? This is a free country, right? I mean if I don't got the bucks to repay the balance, they can't prevent me from working, right? And thus begins a basis for today's featured FINRA Arbitration, which becomes a New Jersey Court case, which becomes a FINRA Office of Hearing Officers Decision, which becomes an SEC appeal, which becomes, yet again, a FINRA Office of Hearing Officers Decision, which becomes, yet again, an SEC appeal.
2012 Wells Fargo Arbitration
From 1998 until August 2010, Keith Patrick Sequeira was registered with FINRA member firm Wells Fargo Advisors LLC and its predecessors. Wells Fargo filed a FINRA Arbitration Statement of Claim in May 2012, asserting that Sequeira had breached the terms of a promissory note. At the close of the hearing, Claimant sought $118,512 in compensatory damages. Representing himself pro se, Sequeira generally denied the allegations, asserted various affirmative defenses, and asserted a Counterclaim seeking damages, interest, fees, and costs. The FINRA Arbitration Panel found Sequeira liable and ordered him to pay to Wells Fargo $47,462.56 in compensatory damages plus interest, $30,000 in attorneys' fee; and $1,000 for FINRA filing fees. In the Matter of the Arbitration Between Wells Fargo Advisors, LLC, Claimant, v. Keith Patrick Sequeira, Respondent (FINRA Arbitration Decision 12-01869 / August 5, 2014)
http://www.finra.org/sites/default/files/aao_documents/12-01869-Award-FINRA-20140805.pdf
http://www.finra.org/sites/default/files/aao_documents/12-01869-Award-FINRA-20140805.pdf
2015 New Jersey Superior Court Confirmation
On September 4, 2014, Sequeira, again acting pro se, filed a Complaint against Wells Fargo in the Superior Court for New Jersey, which issued an Order denying Sequeira's Motion for Reconsideration and Motion to Restore the Case to Active Trial List and confirming the FINRA Arbitration Award. Keith P. Sequeira, Plaintiff, v. Wells Fargo Advisors, LLC, et al., Defendants (Order, Sup. Ct. NJ, Docket No. MON-L-003393-14 / July 10, 2015) (the "Court Order")
http://www.finra.org/sites/default/files/aao_documents/12-01869%20%28Order%20to%20Confirm%29.pdf
The Court Order details efforts by Sequeira to navigate the legal system on his own, and those efforts appear to have largely been without success. As noted in part in the Court Order:
http://www.finra.org/sites/default/files/aao_documents/12-01869%20%28Order%20to%20Confirm%29.pdf
The Court Order details efforts by Sequeira to navigate the legal system on his own, and those efforts appear to have largely been without success. As noted in part in the Court Order:
2. Plaintiff claims that his Complaint in this instant matter "contained a certification pursuant to R. 4:5-1 which identified inter alia that the matters in controversy were the subject of two pending actions in the Appellate Division and one recently -- concluded arbitration under the auspices of the Financial Industry Regulatory Authority, Inc. ("FINRA").3. Plaintiff makes reference to the matters in the Appellate Division without any indication what those claims are about or how they are relevant to the within matter.4. On March 24, 2015 Plaintiff contends that he filed a motion to extend time to file and serve an amended complaint. On April 10, 2014 this Court denied Plaintiff s motionindicting [sic] on the Order,
Case was dismissed for lack of prosecution on 3/27/2014. A motion to extenddiscovery when no answer has been filed is improper. Movant has yet to file an Affidavit of Service and his telephone call to the Clerk does not suffice to protect his rights. Accordingly, the motion is denied and the matter remains dismissed.
So. . . remember waaaay back in August 2014 when a FINRA Arbitration Panel found Sequeira liable and ordered him to pay to Wells Fargo $47,462.56 in compensatory damages plus interest, $30,000 in attorneys' fee; and $1,000 for FINRA filing fees? Sequeira filed another motion for reconsideration, which was denied on July 10, 2015. Apparently not one to take a hint, subtle or otherwise, on September 8, 2016, Sequeira filed a new motion with the New Jersey courts, which was apparently denied on September 30, 2016.
2016 FINRA OHO Decision
On September 15, 2016, sort of in the midst of Sequeira's most recent foray into the New Jersey court system, FINRA conducted a hearing concerning whether Sequeira would be suspended for non-payment of the 2014 Wells Fargo Award. FINRA Regulatory Operations, Complainant, v. Keith Patrick Sequeira, Respondent (Decision, FINRA Office of Hearing Officers, Expedited Proceeding No. ARB160035; STAR No. 20160510627 / November 18, 2016) (the "2016 FINRA OHO Decision")
http://www.finra.org/sites/default/files/OHO_Sequeira_ARB160035_111816_0.pdf
SIDE BAR: FINRA Rulebook:FINRA By-Laws Article VI, Section 3: Suspension or Cancellation(a) The Corporation after 15 days notice in writing, may suspend or cancel the membership of any member or the registration of any person in arrears in the payment of any fees, dues, assessments, or other charges or for failure to furnish any information or reports requested pursuant to Section 2.(b) The Corporation after 15 days notice in writing, may suspend or cancel the membership of any member or suspend from association with any member any person, for failure to comply with an award of arbitrators properly rendered pursuant to the Corporation's Rules, where a timely motion to vacate or modify such award has not been made pursuant to applicable law or where such a motion has been denied, or for failure to comply with a written and executed settlement agreement obtained in connection with an arbitration or mediation submitted for disposition pursuant to the Corporation's Rules.FINRA Rule 9554: Failure to Comply with an Arbitration Award or Related Settlement or an Order of Restitution or Settlement Providing for Restitution(a) Notice of Suspension or CancellationIf a member, person associated with a member or person subject to FINRA's jurisdiction fails to comply with an arbitration award or a settlement agreement related to an arbitration or mediation under Article VI, Section 3 of the FINRA By-Laws or a FINRA order of restitution or FINRA settlement agreement providing for restitution, FINRA staff may provide written notice to such member or person stating that the failure to comply within 21 days of service of the notice will result in a suspension or cancellation of membership or a suspension from associating with any member. When a member or associated person fails to comply with an arbitration award or a settlement agreement related to an arbitration or mediation under Article VI, Section 3 of the FINRA By-Laws involving a customer, a claim of inability to pay is no defense.. . .(g) Request for Termination of the SuspensionA member or person subject to a suspension under this Rule may file a written request for termination of the suspension on the ground of full compliance with the notice or decision. Such request shall be filed with the head of the FINRA department or office that issued the notice or, if another FINRA department or office is named as the party handling the matter on behalf of the issuing department or office, with the head of the FINRA department or office that is so designated. The appropriate head of the department or office may grant relief for good cause shown.
The OHO Panel found that Sequeira had not established a valid defense against suspension for non-payment; and, accordingly, 2016 FINRA OHO Decision states the following in its Syllabus:
Respondent is suspended from associating in any capacity with any FINRA member firm for his failure to pay an arbitration award. The suspension will automatically convert to a bar if he fails to provide sufficient documentary evidence to FINRA Regulatory Operations within 30 days after the date of this decision, showing: (1) he paid the award in full; (2) he entered into a written settlement agreement with Wells Fargo, and he is current in his obligations under the terms of the settlement agreement; or (3) he filed a bankruptcy petition in U. S. Bankruptcy Court pursuant to Title 11 of the United States Bankruptcy Code and the case is pending before the Bankruptcy Court (or the Bankruptcy Court has discharged the debt representing the award)
As set forth in "Disciplinary and Other FINRA Actions" (FINRA, January 2017)
http://www.finra.org/sites/default/files/publication_file/January_2017_Disciplinary_Actions.pdf under the heading "Individuals Suspended for Failure to Comply with an Arbitration Award or Settlement Agreement Pursuant to FINRA Rule 9554" Sequeira was suspended on November 18, 2016.
http://www.finra.org/sites/default/files/publication_file/January_2017_Disciplinary_Actions.pdf under the heading "Individuals Suspended for Failure to Comply with an Arbitration Award or Settlement Agreement Pursuant to FINRA Rule 9554" Sequeira was suspended on November 18, 2016.
As set forth in "Disciplinary and Other FINRA Actions" (FINRA, February 2017) http://www.finra.org/sites/default/files/publication_file/February_2017_Disciplinary_Actions.pdf
under the heading "Individuals Suspended for Failure to Provide Information or Keep Information Current Pursuant to FINRA Rule 9552(d) " Sequeira was suspended from November 18, 2016 - December 17, 2016)
under the heading "Individuals Suspended for Failure to Provide Information or Keep Information Current Pursuant to FINRA Rule 9552(d) " Sequeira was suspended from November 18, 2016 - December 17, 2016)
2017 SEC Remand
Faced with a FINRA suspension that could "automatically convert to a bar,"Sequeira, again acting pro se, appealed the FINRA Decision finding that he did not establish a cognizable defense for his failure to pay the arbitration award. In the Matter of the Application of Keith Patrick Sequeira For Review of Action Taken by FINRA (SEC Opinion, '34 Act Release No. 81786; Admin. Proc. File No. 3-17734 / September 29, 2017) (the "2017 SEC Remand Opinion")
https://www.sec.gov/litigation/opinions/2017/34-81786.pdf
Surprisingly, the SEC remanded the case to FINRA and requested an explanation from the self-regulatory-organization as to the nature of and basis for the suspension/bar imposed upon Sequeira for failure to timlely pay the arbitration award. In language that barely disguised the federal regulator's unhappiness with FINRA's adjudicatory conduct, the 2017 SEC Remand Order states in part [Ed: footnotes omitted] that the OHO Decision:
appears to impose sanctions on a basis that is inconsistent with the rationale we have articulated for reviewing suspensions imposed for failure to pay arbitration awards under the Section 19(f) standard. Unlike in other arbitration cases we have reviewed, the hearing officer imposed a suspension that automatically converted into a bar. The hearing officer's decision suggests that he did so to sanction Sequeira for conduct inconsistent with just and equitable principles of trade. These factors support a conclusion that the hearing officer considered the sanction to be disciplinary in nature and necessary to sanction Sequeira for misconduct rather than designed to influence Sequeira to comply with the arbitration award.
We are reluctant, however, to resolve the issue of the standard of review based on the record before us. Where FINRA does not clearly explain the bases for its conclusions and the sanctions it imposes, "we cannot discharge properly our review function" and remand is appropriate. So too here. In his decision, the hearing officer addressed the basis for the suspension and bar only in passing in a brief footnote. And although the hearing officer provided that the suspension would convert to a bar if certain events did not happen within 30 days of his decision, he did not discuss whether either the suspension or bar would terminate automatically upon the occurrence of those events. The hearing officer thus failed to clearly explain the precise terms of the sanction and the basis for it.
Page 7 of the 2017 SEC Remand Opinion
2017 FINRA OHO Remand Decision
Following the SEC's remand, Sequeira once again represented himself pro se during the ensuing FINRA OHO hearing. FINRA Regulatory Operations, Complainant, v. Keith Patrick Sequeira, Respondent (FINRA Office of Hearing Officers, Expedited Decision Following Remand, Expedited Proceeding No. ARB160035; STAR No. 20160510627 / December 21, 2017) (the "2017 FINRA OHO Remand Decision").
https://www.finra.org/sites/default/files/OHO-Sequeria-ARB160035-122117_0.pdf states in its Syllabus:
Respondent is suspended from associating in any capacity with any FINRA member firm for his failure to pay an arbitration award. The suspension shall continue until he provides sufficient documentary evidence to FINRA showing that: (1) he paid the award in full; (2) he entered into a written settlement agreement with Wells Fargo, and he is current in his obligations under the terms of the settlement agreement; or (3) he filed a bankruptcy petition in U. S. Bankruptcy Court pursuant to Title 11 of the United States Bankruptcy Code and the case is pending before the Bankruptcy Court (or the Bankruptcy Court has discharged the debt representing the award).
The 2017 FINRA OHO Remand Decision found that Wells Fargo's arbitration award against Sequeira had become "final" pursuant to the New Jersey
Superior Court's March 27, 2015,, dismissal of Sequeira's complaint seeking to have the FINRA Arbitration Award vacated, and payment
in full was then immediately due under FINRA's rules. In pertinent part, the 2017 FINRA OHO Remand Decision found that:
Article VI, Section 3(b) of FINRA's By-Laws provides in pertinent part that FINRA may, upon written notice, suspend the registration of an associated person who fails to comply with an arbitration award when the person has not made a timely motion to vacate or modify the award, or when such a motion has been denied.In the expedited hearing of this matter, Sequeira conceded that the New Jersey court dismissed the suit he filed to vacate the award. Nonetheless, he insisted that the dismissal did not adjudicate the merits of his claims, and therefore the suit he had filed was still "pending" before the court.
Page 5 of the 2017 FINRA OHO Remand Decision
Finally, the 2017 FINRA OHO Remand Decision leaves little room for further doubt or second guessing by the SEC:
The purpose of this decision is to make clear that the sanction imposed is not disciplinary in nature, but, consistent with other expedited proceedings instituted under FINRA Rule 9554, is "designed to influence Sequeira to comply with the arbitration award." Therefore, the sanction is modified as set forth below.
Page 3 of the 2017 FINRA OHO Remand Decision
2019 SEC Opinion
In the Matter of the Application of Keith Patrick Sequeira For Review of Action Taken by FINRA (SEC Opinion, '34 Act Release No. 85231; Admin. Proc. File No. 3-17734r / March 1, 2019) (the "2019 SEC Opinion")
https://www.sec.gov/litigation/opinions/2019/34-85231.pdf The SEC dismissed Sequeira's application for review after finding that that FINRA had properly rested its determination to suspend Sequeira under Rule 9554 on three findings: (1) the Award was entered, (2) Sequeira did not pay it, and (3) Sequeira failed to establish a recognized defense for his failure to pay. Sequeira concedes the first two grounds but contends that he established a cognizable defense. Perhaps in a gentle nod to the somewhat damaged collegial feelings engendered by its former slap at FINRA, the SEC concluded its Opinion with this:
https://www.sec.gov/litigation/opinions/2019/34-85231.pdf The SEC dismissed Sequeira's application for review after finding that that FINRA had properly rested its determination to suspend Sequeira under Rule 9554 on three findings: (1) the Award was entered, (2) Sequeira did not pay it, and (3) Sequeira failed to establish a recognized defense for his failure to pay. Sequeira concedes the first two grounds but contends that he established a cognizable defense. Perhaps in a gentle nod to the somewhat damaged collegial feelings engendered by its former slap at FINRA, the SEC concluded its Opinion with this:
Bill Singer's CommentIn sum, we find that the specific grounds on which FINRA based Sequeira's suspension exist in fact, that the suspension was imposed in accordance with FINRA's rules, and that those rules are, and were applied in a manner, consistent with the purposes of the Exchange Act. Accordingly, we dismiss Sequeira's application for review.
Y'all shittin' me?
We've been kickin' this 2012 FINRA Arbitration around in one form or another for seven years, and after one FINRA arbitration, two FINRA OHO hearings and two SEC appeals, we have the federal regulator giving a belabored thumbs-up to its self-regulatory brother. As if to demonstrate that the sublime can be rendered as ridiculous, we have Wall Street's regulators philosophizing about the distinction between FINRA first having suspended Sequeira with the threat of an automatic Bar versus the SEC's apparent preference for a permanent FINRA suspension. Think of it as the difference between a lifetime sentence in prison for being found guilty of murder versus a temporary sentence in prison until such time as you can prove that you weren't guilty of the murder that you were found guilty of before you appealed and the case was remanded back to the trial court, which, go figure, said that you had committed the murder.