Veteran attorney Bill Singer writes about an arbitration claim in which UBS brokers are blamed for customer losses in Lehman, Citigroup, Barclays and A-rated bond investments during the credit crisis.  Claimants sought compensatory damages of $50,000, saying the losses were the result of Respondent Beckett’s handling of their account.  Respondents generally denied the allegations and asserted various affirmative defenses.  Expungement of the arbitration from the CRD's of individual Respondents also were requested. 

The case - In the Matter of the FINRA Arbitration Between Lang Velka and Philip Velka, Claimants, vs. James Michael Orr, Christopher Shawn Beckett, and UBS Financial Services Inc., Respondents (FINRA  Arbitration 10-01449, July 20, 2011) - began in March 2010 and ended in March 2011, when Claimants withdrew their claims against Respondents UBS, Beckett and Orr. 

Expungement.   One month later, Respondents submitted their Motion for Expungement Recommendation, to which Claimant did not respond.   A recorded telephonic expungement hearing was held.  Subject to the provisions of NASD NtM 04-16: Expungement, the FINRA Arbitrator recommended the expungement of Respondent Beckett’s CRD. 

Preliminarily, the FINRA Arbitrator noted that no settlement documents had been submitted by the parties, implying that the claims had been withdrawn and the arbitration dismissed (in contradistinction to “settled”) by Claimants. 

In finding Claimants’ claims as false against Respondent Beckett, FINRA the Arbitrator offered the following rationale:

The evidence does not support a finding that Respondent Beckett violated the securities laws or engaged in any fraudulent or other actionable conduct. It was stated that not only did the Claimants know they were invested in a Lehman Brothers product, but that they knew they were invested in the product up until the day that Lehman Brothers went bankrupt. They knew because they received monthly account statements of their investments. Also, if their investment would have been sold, they would have received a trade confirmation. In addition, they spoke with Respondent Beckett on the telephone on multiple occasions after the date they claim they instructed Respondent Beckett to sell, but never complained once. It was not until Lehman Brothers went bankrupt that Claimants decided to claim that they told Respondent Beckett to sell their investment. Claimants later realized their claim had no merit and dismissed the case in its entirety.

Kudos for the FINRA Arbitrator.  Bill Singer said the arbitrator "goes through the facts in this case and mows down the allegations against Respondent  Beckett.  As noted in the cited quote above, the Arbitrator approaches the task in a meticulous and convincing manner."

He continues:  "Claimants knew they owned Lehman.  Never having received a trade confirmation indicating a sale, there was no basis for them ato ssume otherwise.  Moreover, there’s no record of Claimants’ contemporaneously complaining about a failure to timely execute any Lehman sell orders.

Finally, in this classic case of Non-Sellers’ Remorse, the FINRA Arbitrator implies that Claimants simply woke up too late after the Lehman bankruptcy. This was not the result of any mistake or misconduct by the stockbroker. This was simply a failure by Claimants to pull the trigger on the desired sales.

A short, sweet and righteous ruling by this FINRA Arbitrator. Kudos for her lucid explanations."  

To access the source publication, go to:   [Forbes Blogs, Bill Singer, 7/14/11]