Most FINRA arbitration awards are unanimous. However, once in a while, we have an interesting set of facts that results in a dissent, and, in the almost unheard of cases, we have an outright attack on the entire FINRA Dispute Resolution system as well as the FINRA staff itself. Such was the case in Hasko v. Morgan Stanley Smith Barney LLC, et al. See Hasko v. Morgan Stanley Smith Barney LLC, et al., FINRA Dispute Resolution Arbitration Number 15-03434 (August 10, 2018).
The Hasko case started out like many other expungement cases handled by FINRA arbitration panels, but, somewhere between the hearing and the resulting award, the tracks fell off the case, and the FINRA staff was being accused of “egregious misconduct” by one of its own arbitrators. The dissenting arbitrator in question took great umbrage with the FINRA staff’s refusal to change the language in a CRD (that the unanimous arbitration panel found defamatory) unless a court of competent jurisdiction confirmed the FINRA arbitration award. Apparently, despite FINRA rules not requiring such a court award confirmation where no customer information was at issue, the FINRA staff refused to budge. Consequently, the dissenting arbitrator wrote a detailed and scathing opinion excoriating the FINRA staff’s conduct for seeking to force a “rule change” by making the arbitration panel agree to court confirmation. Accordingly, in the dissent, the arbitrator specifically outlined all of the reasons why a court would not have jurisdiction to confirm, but, if it were to chose to confirm the award, the court should assess against FINRA “all attorney’s fees and expenses, court costs and other related expenses for both parties, or either party as the case may be, and of those of any other persons, if any, compelled by the court to appear or give testimony, for FINRA’s actions in connection with this dispute as set forth above.” The arbitrator’s vitriol was not sated because the arbitrator went onto request that: “[a]s the court deems appropriate it should also charge FINRA with a penalty for any action it deems ethically improper or otherwise egregious in conduct.”
There is really only one word for this arbitration award…. WOW! In short, arbitrators do not normally “bite the hand that fees them,” but, in the Hasko matter, this particular panelist felt the need to simply unload on a system that placed an undue burden on one party in an intra-industry action. Although one appreciates the panelist’s willingness to look at the actual underlying FINRA rule and not slavishly accept some bureaucratic directive, I believe there is more to this story.
Simply stated, the FINRA staff is not the great evil the panelist makes them out to be. Before the criticism of this statement begins, let me state for the record that I am by no means a FINRA apologist, and FINRA and its staff certainly do not need my defense. Nonetheless, FINRA and its staff are working under some harsh and glaring eyes, that is, the public customer claimant’s bar, who view any expungement case as nothing short of a Watergate cover-up. This unending and misguided glare has caused the overly cautious approach so despised by the dissenting arbitrator.
In sum, the FINRA arbitrator should be lauded for taking on this issue, but we hope other arbitration panels lay the blame on the appropriate party and not take out their frustrations on people merely trying to avoid more unwarranted criticism of the CRD process.
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