Thursday, December 14, 2017
Thank you to the BLPB for the chance to write some for the platform. Reading the BLPB has informed my work, and it has kept me up to speed on breaking developments. For readers that don't know me, I'm at the University of Nevada, Las Vegas. My teaching and scholarship focus on business, securities, and professional responsibility issues.
On that note, the Financial Industry Regulatory Authority (FINRA) now considers a live securities and professional responsibility issue. It has a request for comment out about whether non-attorney representatives (NARS) should continue to represent persons in FINRA's arbitration forum. States approach unauthorized practice in different ways. Florida has vigorously policed the unauthorized practice of law. New York, on the other hand, has allowed NARS to represent persons in arbitration.
There may be good reason to be concerned about representation quality from non-attorney advocates. The New York Times covered the issue in 2010, profiling Stock Market Recovery Consultants, an outfit that represents investors in securities arbitration. The Times pointed out that one of the firm's principals "pleaded guilty in 2004 to insurance fraud in a million-dollar scam involving jewelry." Another one of the firm's principals suggested that the Times speak with an attorney that had represented a defendant against them:
Mr. Lapin offered a lawyer who has opposed him on several cases — Michael Schwartzberg of Winget, Spadafora & Schwartzberg — to vouch for his performance. He vouched thusly: “Dealing with Mr. Lapin and his operation is one of the most frustrating experiences I’ve ever dealt with.” Mr. Schwartzberg said the claims that Stock Market Recovery Consultants files — before it has fully investigated the case, and using passages cut and pasted from previous claims — sometimes don’t even get the client’s name right. When it comes to settling, he added, “It’s like hondling at a flea market with these guys: ‘I got these shirts 3 for 10, but for you, 3 for 5.’ ”
FINRA has begun to post comments that it has received. One arbitrator reports that "experiences with NARS have, without exception, been negative: NARs have been discourteous to everyone and made numerous baseless objections and irrelevant arguments, resulting in unnecessarily long and unpleasant hearings." Perhaps shedding light on NARS's practice quality and attention to detail, an oddly-formatted letter takes the opposite position and contends that "[w]hen we restrict, FINRA or State or other, the rights to an effective ADR process in which would impede the intended purpose; we spit in the face of SCOTUS and the American people." Another arbitrator and commentator memorably relates his experience encountering a claim that was "heavy on legal jargon" and "significantly short of the factual allegations needed to state a claim." The arbitrator assumed the pleading had "been prepared by a singularly incompetent lawyer." When he discovered it was a NAR, he reached out to the state bar.
For those interested, the FINRA comment period closes on December 18th.
Sometimes, it can be difficult to distinguish between consumer protection and protectionism for attorneys. To be sure, booting NARS out of the forum will mean that attorneys get more cases. It should only be done if NARS have not delivered competent representation.