All posts tagged Cosgrove

December, 2014 – Within 48 months of collecting a $3.3 million dollar U-5 defamation Award in Louisville, KY, David B. Cosgrove of Cosgrove Law Group, LLC netted a $600,000 Award in Baltimore, MD.  Beyond the compensation, the Award included full expungement for three different defamatory disclosures on U-5 and U-4 filings.  The Cosgrove Law group team traveled to Baltimore and Washington, D.C. for three different sessions on behalf of a former Raymond James Financial broker. Raymond James’ final pre-hearing offer was only $75,000.  According to the broker: “My business attorney suggested that I reach out to Mr. Cosgrove because he felt my case needed someone who truly specialized in the financial industry and matters involving former broker-dealers.  We were thrilled with the outcome and feel it was a complete victory and success…and we attribute much of that success to Mr. Cosgrove and his team. Thanks to Mr. Cosgrove and his team, the outcome was more than we could ever dream of.”

Broker-Dealer agents and Investment Adviser Representatives frequently sign a host of legal documents when they join up with a B/D or RIA. Such documents may include:

  1. Independent Contractor Agreements
  2. Promissory Notes
  3. Stock Participation Plans
  4. Compliance Procedures Manuals

Unfortunately, Agents and Representatives, in my experience, sign these documents without much thought and almost always without the benefit of legal counsel.

When an Agent and a B/D or a Representative and an RIA decide to part ways, something akin to a divorce proceeding is often on the horizon.  Both sides often feel justified in taking impulsive actions that may have various legal consequences.  It is on this battlefield, either during or after the war, that our attorneys spend many of their days.  The file cabinets are flush with U-5 and promissory note matters.  Every now and then, however, an individual will call us on the eve of, rather than in the midst of or the aftermath of the fray.  This person’s foresight almost always pays in cost effective dividends.

Admittedly, legal counsel’s ability to satisfy the goals of the client are frequently limited by legally binding documents signed during the courtship or in the heat of the honeymoon.  Regardless, legal counsel may assist in navigating the choppy waters of a transition.  Impulsive actions in the areas of recruiting or even sabotage can be counseled against from a cool and objective perspective.  U-5 language, payment plans, and stock payouts can be negotiated.

If the transition is of the kind that will generate a regulatory inquiry, legal counsel will be able to familiarize themselves with the facts of the matter before the letter of inquiry arrives.

In sum, if you anticipate transition conflicts, or are even contemplating changing horses; seek out legal counsel.  If you are already midstream, seek faster.

A broker-dealer agent, whether dually registered or a straight-up 7, is obviously subject to FINRA’s enforcement apparatus. Sometimes agents/reps make serious mistakes that prompt a FINRA enforcement investigation. Many such investigations or actions are resolved through an agreed upon resolution commonly referred to as an “AWC.” An AWC is a FINRA Rule 9216 letter of Acceptance, Waiver, and Consent.

The pursuit of an AWC may be a reflexive response for many industry members and their attorneys. A couple of critical issues should, however, be considered. For example, if FINRA has not yet, but wishes to take an on-the-record (“OTR”) exam of you, will an AWC still be available at the end of the exam? Or will you be forced to choose between a lack of candor or making matters worse for yourself in the OTR? Some agents—perhaps retired—are in the envious position of just not really needing to be bothered with the cost and stress of an OTR.

A second issue you should consider before hitting the AWC button is publicity. The AWC will include a substantial statement of facts and FINRA will issue a rather thorough non-negotiated public summary of the AWC terms, factual basis, and sanction. If you are dually registered as an IAR, consider whether the AWC route will destroy the fee-based side of your book. Is it worth retaining your association with a FINRA member in light of the nature and composition of your book? Has your attorney communicated with the states and/or SEC regarding their position on your ticket on the 65 side?

If you firmly believe that an OTR would put you in greater jeopardy than you are already in, or would simply be a waste of your time and money, or that an AWC would throw out the baby with the bathwater—consider a fairly quiet FINRA Rule 9552 exit.

Rule 9552 addresses a regulated person’s failure to provide information to FINRA. The Rule provides for expedited automatic procedures that will allow for a gradual letter-notice transition from warning to suspension to revocation. Unless one decides to challenge one of the automatic stages, there are no pleadings or hearings or press releases. Refusing to sit for an OTR is a violation of Rule 9552.

It is possible your current counsel has only laid out two options for you: an expensive prolonged legal battle with FINRA or an AWC suicide pact. At least consider your third option, Rule 9552. But remember—the 9552 disposition is probably not an option once you sit for an OTR.