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Wall Street’s Kangaroo Court: Calling Out FINRA’s Linda Fienberg

Posted by Larry Doyle on May 22, 2014 11:27 AM |

Do you ever hear or read a statement put forth by a public official, industry representative, or regulatory spokesperson and think “Are you kidding me?” . . .  if not something far less polite than that?

I would guess that in a world in which politicians and their spokesmen are not often called on the carpet, many people allow statements worthy of being challenged to go in one ear and out the other if they bother to listen at all.

Today I am not of a mind to be quite so dismissive given the fact that the topic at hand — Wall Street arbitration — not only touches every employee on Wall Street, but also every investor in the nation.

Let’s navigate and continue to play to win for those who care about real transparency and integrity in America.  

I am compelled to address a statement put forth recently by Linda Fienberg, the president of FINRA’s dispute resolution and chief hearing officer. The statement made by Ms. Fienberg deals specifically with the manner in which FINRA records testimony in arbitration hearings. The implications of Fienberg’s statement directly impacts the case of Mark Mensack.

For those unaware, I wrote about this fascinating case in chapter 5 (Kangaroo Court) of my book, In Bed with Wall Street. I highlighted the fact that while Mensack appealed his lost arbitration, the folks at FINRA only provided him with 10 of the 18 hours worth of testimony in the case. Can you imagine that? Think it might be a little challenging to make a legitimate appeal when so much testimony is missing. Many readers of my book have told me of all the egregious injustices, scandalous practices, and corruption revealed in my book, Mensack’s case and the missing testimony take the cake.

Clearly this topic and and the injustice done to Mensack have caught the attention of many folks. Think Advisors’ Jane Wollman Rusoff wrote a fabulous commentary, Brokers Say FINRA Arbitration ‘Rigged’, Like Dealing with The Devil, on Wall Street arbitration just the other day. In the midst of her hard hitting review, Rusoff addresses the Mensack case and includes a retort from Fienberg:

One advisor who tried to appeal is Mark Mensack, now an independent fiduciary consultant and RIA with Piedmont Investment Advisors in Lansdowne, Virginia. But he was unsuccessful in his attempt after losing an arbitration case to Morgan Stanley. It mattered not at all to FINRA that, when he obtained a copy of his recorded hearing proceedings, in preparation of the appeal, eight hours were missing in 14 different places — all material that supported his case.

Fienberg says: “On rare occasions, it has happened that an arbitrator has forgotten to turn on the recording device. But we have a built-in procedure now to almost ensure that cannot happen again.”

Let’s take the gloves off.

Clearly, Fienberg would like to have us believe that the individual operating the recording device in Mensack’s case simply forgot to turn the machine on. If we were to believe that, we would have to accept that the operator “forgot” at 14 separate times . . . for an average duration each and every time of 34 minutes and 18 seconds . . .  AND . . . that these operational memory lapses just so happened to occur in the midst of when the representatives for Morgan Stanley were testifying.

What are the odds of all those crooked curves in the court aligning? I do not think so, Ms. Fienberg.

CHALLENGE!!!

I am calling Linda Fienberg out. In my strong opinion, a statement as weak and pathetic as that put forth by Ms. Fienberg only further confirms that the FINRA arbitration system is truly a kangaroo court.

Ms. Fienberg, FINRA CEO Rick Ketchum, and all of their FINRA colleagues should think long and hard about the impact that their operational “forgetfulness” had on Mr. Mensack’s professional and personal well being and that of his family.

I might imagine that the folks at FINRA do not appreciate being called out like this, but when they put forth a statement such as that by Ms. Fienberg to explain away such a grievous injustice as that done to Mr. Mensack — and who knows, likely others as well —  then too bad.

Do you think Fienberg et al deserve to be called out?

What’s that?

Did somebody in the back of the room say “bull%#&^”, “blow&*^”, and “banana republic?”

Navigate accordingly.

Larry Doyle

Please order a hard copy or Kindle version of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

For those reading this via a syndicated outlet or by e-mail or another delivery, please visit the blog to comment on this piece of ‘sense on cents.’

Please subscribe to all my work via e-mail.

  • If you have any doubt regarding Larry’s description of “egregious injustices, scandalous practices, and corruption” Google “FINRA Arbitration: Kangaroo Court or Model of Fairness.”

    The footnotes in this article link to incontrovertible evidence that Larry is spot-on! Footnotes 4, 16 & 19 alone are sufficient evidence to support Larry’s appraisal.

  • James

    Great post.

    I have spoken with Linda Feinberg on this issue and experienced comparable issues. She refuses to address. In the case of a client’s arbitration case, the tapes provided were inaudible. FINRA then agreed to provide new cd’s but again, often the substance of the arguments is not audible. This is a major issue.

    Perhaps it only fair since these are not isolated instances, that the SEC step up and throw out any case that FINRA did not record, as stipulated. The party in this situation, would have another opportunity to present their case, waiving any statutory time constraints. It is an abuse of the principles of our legal system and the SEC needs to step forward and resolve these cases.

    Further, in this particular case, after the tapes were turned off, the Wall Street attorney threatened the three panel members with —you know what happens if you do not rule our way, in so many words..

    Keep up the great work.

    • James,

      Here is a quote published in American Lawyer last August regarding the Wall Street attorney who represented Morgan Stanley in my arbitration:

      “O’Melveny lawyers, including labor and employment
      partner and New York office head Jeffrey Kohn, engaged in “rampant, endemic, unabated, false, fraudulent, and deceptive misconduct”“

      This quote was not in regard to my arbitration; however, I have evidence to substantiate all of the allegations you’ll find in footnote #19 of my Kangaroo Court article…Hmm?

  • Steve

    LD – right on the screws brother. Thanks for this.

    Was thinking of you last weekend while up at BU’s School of Engineering commencement. The speaker, Kevin “Kit” Parker from Harvard, in one of his excellent points that morning, challenged the BU engineering graduates to “call out and challenge/fight ‘stupid’ whenever and wherever they find it”. Just like you have been doing.

    I’d link to the speech for you to view but I can’t find it on the web yet. It was excellent.

    Thanks again for keeping the flame lit on this stuff.

  • stephenwinks

    When we get to the point where truth cannot talk to power we must challenge/fight stupid as the alternative demeans the law and sense of the impartiality of justice. The Mensack case is troublesome to everyone who is aware of the facts, and there are many, many, many others. It this a case of regulatory incompetence, miss-management or a pattern of misbehavior that is institutionally condoned denying due process to a fair hearing of disputes within the financial services industry which is controlled by FINRA arbitration?
    Has the brokerage industry become unassailable by individual investors and brokers who have legitimate disputes? Doesn’t this destroy the trust and confidence of the investing public and the broker? Does this not defeat any sense of ethical behavior within the industry. What a shame for a once proud industry.
    SCW

  • jrwells5

    According to Bloomberg News, FINRA fined JPMorgan Chase the equivalent of 3 minutes of profit for its 6,300 failures to report trades to the TRACE system. With this action, Finra takes the clear lead in the contest for title of Most Timid & Ineffectual
    Securities Regulator. Previous record holder would probably be Christopher Cox at the SEC.

  • James Eastman

    I would love to join any other Advisors who have issues with FINRA. I am a former CPA.PFS financial advisor with Morgan Stanley. I too went through a long and expensive FiNRA process. Our case however, resulted in FINRA dismissing Morgan Stanley from our case for “lack of standing”. see article in NY TImes business section.

    In addition, we filed two whistle blower cases to expose MSSB unfair and unethical business practices. The difference, we have over thirty thousand pages of material collected in our case, including some damning e-mails.

    It is time that someone stood up to these firms who apparently belive that because they have unlimited access to shareholder money, they can always get their way.

    As a former top advisor, and a marathon runner, they should reconsider!

    Let’s come up with some ideas on how to use the legal system if we can, and social media if we cannot, to educate the public on this travesty of a business model. One that cannot even tell its’ own clients that it will “act in their best interest”

    Any takers?

    • James,

      Your ship just came in.

      A recently launched magazine dealing with the issues you outline just launched. This periodical is entitled Unsung Heroes. Here is the link to the first edition of this magazine. Please spread the word!!

      http://www.magcloud.com/browse/issue/778928

      I am profusely grateful to the editor Syd Leblanc for touting my book In Bed with Wall Street on page 4.

  • Beth Strycharz

    Larry, keep up the good work… you’ve got readers!
    I have learned a lot since ’08.
    I just started reading your book and also bought Conspiracy of Fools, . Thanks again for all the information you have given us and will give us. We’re here.






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