Category: FINRA Arbitration

Dismissal of a Counterclaim is an Appropriate Sanction for Flagrant Discovery Abuse

Simons vs. Fox, No. 17-1012 (7th Cir., February 1, 2018)

This appeal addresses the propriety of sanctions against a litigant for discovery abuses. In a highly contested dispute between the ex-CEO of a trading firm and its founder, the founder and defendant, asks the appellate court to vacate the dismissal of his counterclaim as a sanction for his discovery abuse. Simons sued Fox for firing him for uncovering Fox’s alleged violations of corporate and securities laws. Fox then countersued Simons for defamation. Throughout the acrimonious litigation, Fox asserted that Simons lied in order to destroy Fox’s companies. Rather than prove that assertion with evidence, Fox obstructed Simons’s discovery. This led to sanctions and ultimately the dismissal of Fox’s counterclaim. Fox appeals the orders leading up to the dismissal.

Fox repeatedly refused Simons’s discovery requests, he refused to produce documents he possessed or controlled, and he was an uncooperative deponent. The district court judge directed the production of documents in at least three separate orders, yet Fox declined to produce discovery. The judge sanctioned Fox and he refused to pay the monetary sanction. Fox was then held in contempt of court and ordered to pay a fine for everyday he remained in contempt. Fox refused to pay the fine for contempt. After Fox asserted that he lacked funds to pay any fines, the judge entered an alternative sanction of dismissing his counterclaim as the sanction for Fox’s obstruction. The court found that when presented with the dismissal of claims as a sanction, “we weigh not only the straw that finally broke the camel’s back, but all the straws that the recalcitrant party piled on over the course of the lawsuit.” Domanus, 742 F.3d at 301 (quoting e360 Insight, Inc. v. Spamhaus Project, 658 F.3d 637, 643 (7th Cir. 2011)).

Similarly, the circuit court held that the trial court did not commit reversible error by allowing Simons to voluntarily dismiss the claims against Fox after Fox’s counterclaim was dismissed. Federal Rules of Civil Procedure 41(a)(2) allows a Plaintiff to dismiss claims voluntarily at any time “on terms the court considers proper.” The court reasoned that at the time of dismissal, Fox was in contempt of court, and he showed no prospect of respecting his long-ignored discovery obligations. Therefore, Fox cannot show prejudice from the judge allowing Simons to dismiss his claims voluntarily to end the case. Finally, Fox contended that the district judge was biased and should have disqualified himself. The court found that judicial rulings, even those that “are critical or disapproving of, or even hostile to” a party, do not constitute a valid basis for disqualification except in the “rarest circumstances” in which “deep-seated favoritism or antagonism” makes fair judgement impossible. Liteky v. United States, 510 U.S. 540, 555 (1994). The circuit court found that Fox presented no persuasive reason to disturb the district judge’s fair and patient approach to managing the case and affirmed the decision.

Second Circuit Rejects Manifest Disregard of Law as a Basis for Vacating Arbitration Award Against Wells Fargo Advisors

Pfeffer v. Wells Fargo Advisors, LLC, et al., No. 17-1819-cv (2d. Cir. Feb. 15, 2018)

A FINRA arbitration panel dismissed Claimant Pfeffer’s state law claims arising from Wells Fargo Advisors failure to follower her late husband’s instructions to transfer all assets from a trust naming his children as beneficiaries to a trust naming her as the beneficiary. Pfeffer testified that her now deceased husband requested the transfer because the Pfeffers became concerned about the management of the accounts. The Wells Fargo broker testified that he did not transfer the assets because he was worried that Mr. Pfeffer was not competent and was being unduly influenced by Mrs. Pfeffer. After receiving two letters from physicians confirming that Mr. Pfeffer was not capable of making financial decisions, Wells Fargo froze both trust accounts. After a five-and-a-half-day hearing, during which both parties presented testimony and other evidence, the Panel denied Mrs. Pfeffer’s claim.

Mrs. Pfeffer filed a complaint challenging the arbitration award and Wells Fargo moved to dismiss the complaint and confirm the award. The district court confirmed the award and this appeal followed. On appeal, Mrs. Pfeffer argued that the award was procured by undue means, evident partiality, and misconduct because the Panel was intimidated by defense counsel and refused to consider relevant evidence. Pfeffer alleged that the Panel exhibited manifest disregard for the law and facts.

Under the Federal Arbitration Act, a district court may vacate an arbitration award if: (1) the award was procured by “corruption, fraud, or undue means”; (2) the arbitrators exhibited “evident partiality” or “corruption”; (3) the arbitrators were guilty of “misconduct” such as “refusing to hear evidence pertinent and material to the controversy” or “any other misbehavior” that prejudiced the rights of any party; or (4) the arbitrators “exceeded their powers.” 9 U.S.C. § 10(a); see also AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 350 (2011). The court reasoned that the second circuit does not recognize manifest disregard of the evidence as a proper grounds for vacating an arbitration panel’s award, and will only find a manifest disregard for the law where there is no colorable justification for a panel’s conclusion. Wallace v. Buttar, 378 F.3d 182, 193 (2d Cir. 2004).

The court held that Mrs. Pfeffer failed to meet her “very high” burden to demonstrate that vacatur was appropriate. Id. at 103. The court found that the transcript of the arbitration reveals no suggestion that the award was produced by undue means, evident partiality, or misconduct. Mrs. Pfeffer’s allegations that the Panel failed to abate defense counsel’s abrasive manner and that it was intimidated by him are belied by the record. The court found that contrary to Mrs. Pfeffer’s allegations, the transcript of the proceedings shows that the Panel considered her evidence, understood the issues underlying her claims, and afforded her latitude because she was pro se. Therefore, the court found no support for the conclusion that the panel had manifestly disregarded the law and affirmed the lower court’s decision confirming the award.

FINRA Elder-Abuse Rule to Take Effect Next Month

A new FINRA regulation taking effect on February 5, 2018 is designed to prevent financial exploitation of seniors and will result in what could be challenging conversations between brokers and older clients.  The rule requires that brokers make a reasonable effort to identify a trusted person who can be contacted if the broker is concerned that the client is suffering from diminished mental capacity or is the target of a scam. The request for a trusted contact must be made at account openings for new clients and during account updates with existing clients. The regulation also provides brokers with liability protection if they place a hold on disbursements from an account because they think their clients could be harmed.


Hanley law represents individual investors nationwide with significant losses in their portfolios, retirement plans or investment accounts.  The firm is dedicated to assisting investors to recover losses suffered by unsuitability, over-concentration, fraud, misrepresentation, self-dealing, unauthorized trades or other wrongful acts, whether intentional or negligent.  The firm handles cases against the major Wall Street broker dealers.

Let Hanley Law work for you. Call (239) 649-0050 or contact the firm through our Website to arrange a free confidential consultation with an attorney to discuss your experiences with your stock broker which resulted in investment losses.

FINRA Lawyers can help protect investments

When someone has made financial investments in the form of securities, it is possible that their investments won’t result in the profit they anticipate. This can happen for a number of reasons, including changes in the industry you’ve invested in, but it can also be the result of broker misconduct. If you feel that your investments failed as the result of actions made by your broker, it’s important to find reliable a FINRA lawyer to help you with your case. There may have been misconduct on the part of your broker or brokerage firm which caused your investments to fail, and it’s important to explore all of these possibilities when determining the cause of your financial losses. FINRA is the regulatory organization which oversees the financial industry, including securities investments. A security is an investment which is made by individuals or businesses with the anticipation of a return in profit. Because these types of investments can be a good way to ensure a comfortable future for yourself and your family, investing has become a more common practice. FINRA exists to protect the market’s integrity and provide investors quick and effective regulation should they run into trouble. FINRA isn’t part of the government, but are authorized by congress to protect American investors in Florida and nationwide. Of course every investor assumes they are trading in a fair financial market, and FINRA’s regulatory efforts make this true the majority of the time.

However, there are predatory practices employed by brokers which can lead to losses on your end. If you find yourself in this situation, it’s likely that you have already agreed to solve any disputes through arbitration. When entering into arbitration for financial disputes there are many guidelines and procedures which have strict deadlines and must be followed accordingly. Failure to properly fill out paperwork, provide documentation, respond to motions, etc. can all invalidate your claim, resulting in potentially huge losses on your end. A qualified FINRA lawyer in Florida will help you navigate the many facets of securities arbitration and make sure that your claim is not only handled according to all of FINRA’s procedures, but handled in a way which ensures the best possible outcome for investors.

The Hanley Law are experienced FINRA lawyers who help investors in Naples, Fort Myers, Sarasota, Tampa, greater Florida and nationwide settle their FINRA related disputes or arbitration. To have your case evaluated for free by experienced FINRA lawyers, contact The Hanley Law.

What is Securities Arbitration?

Securities Arbitration is the process, which takes place following a dispute with a broker or dealer. Prior to arbitration, the investor has determined that the broker engaged in some form of wrongdoing, or otherwise negligent action that resulted in a loss. Depending on the amount of the claim, the investor may or may not have to appear before an arbitrator or group of arbitrators. Arbitration is an alternative to settling in court and is often the preferred method of dispute resolution because it is typically faster and less expensive.

While typically a contract between a firm and investor is what provides ground for arbitration, the absence of a contractual agreement does not mean that the dispute cannot be settled through arbitration. If the broker or firm is registered with the Financial Industry Regulatory Authority, they are bound to FINRAs procedural guidelines, which include the duty to participate in arbitration when a conflict arises.

Arbitration is NOT an investor complaint. If you want to make FINRA aware of any suspicious activity then you should file an investor complaint. Arbitration is similar to a court case, with formal proceedings but for the reasons stated above is a simpler and quicker alternative to litigation. If a claim is under $50,000 then the dispute can be settled through what is known as “Simplified Arbitration”. In this scenario, parties provide case materials, which are reviewed by an arbitrator; this does not require parties to appear in person. For cases involving larger sums, arbitration takes place in-person and is reviewed by a panel of up to 3 arbitrators.

To initiate an arbitration, the investor must submit what is known as a “Statement of Claim”. The statement of claim must be articulate and while there is no standardized format, following the format of a suit in court is effective. The statement of claim should include all the pertinent information that the arbitrator(s) need to make an intelligent decision. This included the nature of the dispute, any background information, dates, types of securities at hand, names of the parties involved, the kind of transactions that took place and the damages sought.

Following the statement of claim, the respondents must answer to the allegations. This must also be detailed and simple denial will not suffice. At this point in time the respondent can file a counter-claim against the investor or a 3rd party involved. Once the submission of facts from either side is received by FINRA, a hearing location is chosen. Before the hearing is a discover period, where documentation is provided and exchanged amongst parties involved and FINRA officials. This stage is a window of opportunity for the assertive attorney as it is the opportunity to obtain any and all relevant information from the other party prior to the hearing. Often, the persistence of a dedicated attorney during the prehearing discovery phase can result in a favorable verdict for their client.

The hearing itself is scheduled in advance and follows a similar format to a case in court. Witnesses are interviewed, cross-examined and evidence is produced. A series of questions are asked and there are multiple stages before the process is concluded. The arbitrators will determine what awards are served usually within 30 days of the last hearing. The award will include the basic facts of the dispute but does not have to provide justification or rationale behind the actual dollar amount awarded. The opportunity to appeal a decision exists on the state and federal level but it is rarely ever successful.

The Hanley Law is a Naples, Florida based firm who have an extensive track record of successfully securing awards for their clients. The arbitration process is complex and difficult to navigate without the guidance and advocacy that skilled attorneys can provide. Hanley Law offers a free case evaluation to determine the best course of action for you.

Florida FINRA Litigation

FINRA is the financial institution which regulates securities and the financial market. FINRA attorneys focus their practice on niche areas of FINRA law, whether they are defending brokers against regulatory inquiries, working on arbitration claims involving both investors & brokers, or defending investors against predatory broker practices. Most, if not every, brokerage firm requires potential investors to agree to resolve any disputes through FINRA arbitration. This is usually outlined in the opening documents, and states specifically that any issues will be settled through FINRA dispute resolution. Legal professionals with experience representing both investors & brokers before FINRA arbitrators should be familiar with all procedures, the forum & arbitrators. With their experience and knowledge, the first step to take if you have an issue with an investment should be to contact an accomplished FINRA attorney. They know how to properly prosecute cases on the behalf of both brokers and investors.

If you are an investor, they are many ways that you might feel you’ve been wronged by a broker or financial institution. You might believe that an investment made was unsuitable to your investment portfolio, or that an investment was made based on misleading or even fraudulent statements made by your broker. You might feel that your portfolio was over-concentrated in one industry or area, which resulted in your investments not being profitable or worthwhile. Even more concerning, you might feel your account was subjected to unauthorized trading, or churning (excessive trading to increase broker commissions). However you might feel that your investments have been mishandled, it’s important to consult with an attorney experienced in FINRA litigation to evaluate your case and determine any legal discourse necessary.

Most investment issues are resolved through securities arbitration, and as stated earlier, many brokers outline this requirement in their opening documents. Securities arbitration has become the most popular means of resolving broker-dealer conflicts in Florida and nationwide, largely due to a Supreme Court decision in 1987, and has long been used as it provides a quick and inexpensive alternative to arbitrating through the courts. After beginning the arbitration process, there are many different factors which need to be determined and decided upon by all involved parties, including arbitrator panel composition, hearing locations, and other details related to the arbitration process. While cases typically take between 1 year and 14 months to resolve, the process can be delayed or expedited depending on the complexity of the issue or the discovery timeline.

In Orlando and Florida, there are strict deadlines and regulations related to securities arbitration that can elude an inexperienced individual. If you are concerned about your investments it’s important to consult an experienced attorney who understands all FINRA litigation and arbitration requirements as they relate to Florida. Contact the Hanley Law to have your case evaluated for free and determine the legal validity and potential outcomes of your unique situation.

FINRA Arbitration Orlando, Florida

FINRA stands for the Financial Industry Regulatory Authority. It is an organization that oversees the securities industry. The organizations primary function is to protect investors and does so by subjecting traders to a set of rules and regulations. Enforcing rules and subjecting violators to punishment is what takes place after the detection of any wrongdoing. Educating the public is a primary function as well, as the best way to reduce the impact disputes have, is to avoid them altogether. Being that we live in an imperfect world and trade in an imperfect marketplace, disputes are inevitable. Once a dispute ensues, FINRA’s forum handles the overwhelming majority of arbitration’s and mediation’s with locations in all 50 states as well as in the United Kingdom and Puerto Rico.

Since practically all disputes in this industry pass through the hands of FINRA, it is important to retain an attorney that is knowledgeable, experienced and tested when it comes to FINRA regulations, procedural nuances and formal hearings. While resolving a security complaint doesn’t necessarilly require you to have an attorney, if you are seeking a beneficial outcome, it is in your best interest. Brokerage firms will be represented by an attorney which is why you need to come represented as well. The attorneys that that defend brokerage firms are savvy and you’ll need a fierce advocate to represent your best interests.

Depending on the circumstances, a dispute will either result in Arbitration or Mediation. The former closely parallels a trial that would take place in a United States court. The state of Florida has specific narrowly tailored guidelines for arbitration that change the landscape of the field. In other states, individuals with no license to practice law can provide advice to disputant investors for a fee. Arrangements of this nature are banned in Florida. In addition to this, arbitrators can include reasonable attorneys fees as part of the settlement for the receiving party. Before any type of settlement is awarded, the facts are reviewed. The process requires an initiation (commencement) , a statement of claim, examination of witnesses and presentation of evidence.

The Hanley Law is a South Florida based firm with the FINRA experience and insight needed to successfully secure a settlement on your behalf. The firms history with the security industry precedes the creation of FINRA. Whether your investments were poorly handled or you were the victim of stock fraud, Hanley Law offers a free case evaluation to determine the best course of action for you.

How to Recover Damages Through Securities Arbitration

Florida Securities Arbitration Attorneys at Hanley Law, PLLC

If you have investments with a financial corporation or brokerage firm, it’s important to monitor your investments to ensure they are being handled according to your agreement with the broker. If you suspect that some fraudulent activity might be going on, including any activity you didn’t consent to, you might want to consider resolving the issue through arbitration. Arbitration is how the majority of disputes in the securities industry are resolved (as opposed to a traditional courtroom trial) because it is a quick and inexpensive way to solve complicated concerns.

The process will typically take anywhere between 12-14 months from the time the claim was filed, but the timeframe will vary depending on certain factors (# of involved parties, complexity of issues, personal schedules, volume of necessary discovery) and can be expedited in special circumstances (due to medical concerns or age). The first step is to file a Statement of Claim with FINRA. This will include the details of the dispute, including identifying the Claimant (who filed the claim) and Respondent (who the claim is against), and the type of damages requested. The Claimant must also file an Arbitration Submission Agreement and pay a filing fee, which depends on the amount of the claim, number of discovery motions, number of hearing sessions and any postponements. Next the claim gets served to the respondent(s), who then file an “answer” which specifies any relevant facts and outlines their defense.

After the answer is received, the arbitrator selection process begins. The Claimant and Respondent are provided lists of arbitrators (generated from FINRA’s Neutral List Selection System) and get the opportunity to evaluate their potential arbitrators and eliminate those they don’t want on their case. Depending on the dollar amount of the damages requested and parties involved, 1-3 arbitrators may be assigned. Next, you will have a prehearing conference with all parties involved including the appointed arbitrators to determine the timelines for discovery, briefing & motions, and evidentiary hearing dates.

After all discovery and any motions have been filed it is time for the actual hearing, which is similar to a normal trial where the Claimant will try and prove their claim and the Respondent will try to defend their position. The hearing will typically include testimony from involved parties and any witnesses, and reviewing any evidentiary documents. After the hearing arbitrators will then deliberate and render their decision of award, which is issued within 30 days. There is no appeals process offered through FINRA, but district courts do have the power to overturn an arbitration award under certain circumstances. Brokerage firms & brokers then have 30 days to pay you, or they risk suspension by FINRA.

This is a highly simplified version of the securities arbitration process, intended to give a general overview of how to collect damages through arbitration. To learn more or to have your case evaluated for free by legal experts, please contact The Hanley Law.

Common Sales Pitches Used in Investment Scams

The Financial Industry Regulatory Authority (FINRA) issued a new Investor Alert called Avoiding Investment Scams which describes common sales pitches used in investment scams.

Investment fraudsters make their living by making sure the investments they pitch sound good and true. Additionally, fraudsters tailor their pitches to the investor by first gaining background information on the investor and using that information to lure them in. FINRA has identified the following five (5) most common sales pitch tactics:

  1. Phantom Riches Tactic: Entice investors with promises of wealth.
    2. Source Credibility Tactic: Build credibility with claims of having expertise, experience and being from a reputable firm.
    3. Social Consensus Tactic: Lead investors to believe that other savvy investors have already invested.
    4. Reciprocity Tactic: Offer to do a small favor for investor in return for the investor doing a large favor.
    5. Scarcity Tactic: Create a false sense of urgency by claiming limited supply of product.

If you and have suffered investment losses, please contact the Hanley Law to explore your legal options. The Hanley Law is dedicated to helping investors who have been victims of securities fraud. If you have lost money as a result of securities fraud, you may be able to recover your financial losses. Contact us today toll free at (239) 649-0050 for a free initial consultation.

FINRA Issues New Investor Alert, Avoiding Investment Scams

The Financial Industry Regulatory Authority (FINRA) issued a new Investor Alert called Avoiding Investment Scams which describes common types of tactics employed by fraudsters to solicit investors. FINRA advises of the following seven (7) red flags investors should look out for:

  1. Guarantees: Be wary of anyone who predicts how investments will perform.
    2. Unregistered Products: Many investments scams involve unlicensed individuals selling unregistered products.
    3. Overly Consistent Returns: Investments that provide steady returns regardless of current market conditions.
    4. Complex Strategies: Avoid anyone who cannot clearly explain their investment technique.
    5. Missing Documentation: A stock should have a prospectus or offering circular, if not the product may be unregistered.
    6. Account Discrepancies: Unauthorized trades, missing funds or other problems with your account statements could indicate churning or fraud.
    7. Pushy Salesperson: No reputable investment professional should push you to make an immediate decision about an investment.

If you and have suffered investment losses, please contact the Hanley Law to explore your legal options. The Hanley Law is dedicated to helping investors who have been victims of securities fraud. If you have lost money as a result of securities fraud, you may be able to recover your financial losses. Contact us today toll free at (239) 649-0050 for a free initial consultation.