Securities Industry Commentator by Bill Singer Esq

A jury will probably never hear Paston's case. After she sued Cantor for discrimination and retaliation, the firm told a New York court that it should stop the proceedings because she signed a promise years ago to take any complaints into the private system of arbitration. While tech giants have agreed under pressure to stop forcing workers to arbitrate their fights with bosses, it's still common on Wall Street. A judge agreed with Cantor this year, which means Paston is going to confront the firm behind closed doors.

From July 2013 through August 2015 (the "Relevant Period"), Ace failed to reasonably supervise a former representative's sale of non-traditional exchange-traded funds ("ETFs") and exchange-traded notes ("ETNs") to his customers. The firm also failed to establish a supervisory system, including written supervisory procedures, reasonably designed to detect potential excessive trading. The firm also failed to establish and maintain a reasonable supervisory system, including written supervisory procedures, concerning the approval of options accounts. Based on the foregoing, the firm violated NASD Rules 3010(a) and (b) (before December 1, 2014), FINRA Rules 3110(a) and (b) (for conduct on or after December 1, 2014), and FINRA Rule 2010.

During the Relevant Period, the firm also accepted options orders in an account that was not approved for options trading by a Registered Options Principal or a Limited Principal-General Securities Sales Supervisor. That account was located in a branch office with more than three registered representatives and whose principal supervisor (the branch manager) was not qualified to supervise an options business. The firm's written procedures were unreasonable because they did not require the branch's principal supervisor to obtain the necessary qualifications to supervise the branch's options business. Accordingly, the firm violated FINRA Rules 2360(b)(16)(A), (20)(A), and (20)(B), as well as FINRA Rule 2010. 

From March 2010 to October 2016 and again from September 2018 to January 2019, Wertz created false account statements for a customer in connection with securing a $1.872 million [sic -- probably should have stated "$1.872 million loan"]. Wertz received $50,000 from the customer and the customer's brother in payment for his actions. The customer's entity defaulted on the loan, resulting in a loss to the bank of more than $3.2 million. By virtue of this misconduct, Wertz violated FINRA Rule 2010. 

In March 2010, Wertz created a false account statement for TP by changing the name, address, and account number on another customer's statement, which showed the account holding more than $3 million in securities. Wertz gave the false account statement to the Bank's loan officer. Based in part on the false account statement, the Bank loaned TP's entity $1.872 million. In payment for his actions, Wertz received $10,000 from TP's brother and TP's promise to invest other funds with him in the future. 

Because the Bank required copies of account statements each month, Wertz created a false account statement for TP every month from April 2010 until October 2016 and again from September 2018 until approximately January 2019.2Wertz gave some of the false statements to TP, knowing that TP would provide them to the Bank. Wertz gave others directly to the Bank. Wertz knew the account statements contained false values and that they would be submitted to the Bank to obtain and maintain the loan. Wertz received an additional $40,000 in payments from TP and TP's brother between 2010 and 2014 for creating the additional false account statements.

• Securities Industry Commentator
• Bill Singer