William Cohan has been on a tear lately. Lehman, Goldman, MF Global — he has been shooting at all of the big targets.
Last week, he took aim at the “Kangaroo Court” that passes for “Wall Street Justice.” He was of course referring to the FINRA system of arbitration. Cohan called it “the largest ongoing abdication of legal rights in America today“:
“Probably unbeknownst to the millions of people who interact with Wall Street every day — either as brokerage customers or as employees of Wall Street firms — there is a price of admission to this world tucked deep inside the boilerplate documents that one must sign to open an account or to get hired. This catch is a nonnegotiable agreement for when disputes arise, say, about a bonus promised but not paid, or about a rogue broker who sticks his client’s money in a synthetic collateralized debt obligation that goes bust. Under the deal, the only venue to litigate the claim is a mediation or arbitration process overseen and administered by the Financial Industry Regulatory Authority, Wall Street’s powerful self- regulatory organization.
Finra oversees some 4,460 brokerage firms and 630,000 registered representatives, mostly brokers, traders and bankers. By signing the initial agreements — and if you don’t, you can forget about working on Wall Street or having a brokerage account with a Wall Street firm — you agree not to pursue any future monetary claim against Wall Street in the U.S. court system.” (emphasis added)
This time, Cohan is tilting at windmills.
Its not that he is wrong — he is, to the contrary, dead on right. But the simple fact of the matter is that, short of a revolution overthrowing the government, nothing is going to ever change when it comes to FINRA arbitrations. Nothing.
I’ll give you four reasons:
1) Its a complex subject, part of a system that has been in place for decades; That means its not well understood by the public or legislators, there is a broad infrastructure already in place, and there exists enormous institutional inertia;
2) The only time people discover that they have no legal rights is AFTER they have been screwed over by Wall Street. To pursue a legal remedy, you must navigate an arbitration system owned lock stock & barrel by the firms that just screwed you! (Good luck with that!)
3) Nobody with any legislative or judicial authority gives a flying fuck about you the investor. That’s right, I said it: Congress thinks that you, the individual investor, can go fuck yourself.
4) The Court system itself refuses to recognize how utterly corrupt it is for an arbitration system to be owned by the defendants; Lastly, the US Supreme Court itself — a biased, corrupt, ideologically driven embarrassment that has said corporations have the same rights as people — has tolerated this gutter system for years.
In case you are unsure of precisely what I am saying, let me simplify it for you: If you have a dispute with Wall Street, the odds are strongly that YOU ARE FUCKED. Sure, a few people win an occasional arbitration. But they are few and far between — much less than half — and it ain’t because the street is squeaky clean.
We could do a full analysis on the outcomes, but alas, Arbitrations are private. The amount of info available about arb outcomes are neither detailed nor transparent.
Imagine for a moment a world where all of the Repair shops and Automobile Mechanics in the country formed an association. As part of that union, they all agreed that no one would work on any vehicle unless the car owner signed an arbitration agreement. Same goes for the hiring of mechanics — they had to sign as well.
Now imagine when you had a dispute over a repair, you went to the Repair Garage & Automobile Mechanics Arbitration Association. How do you think that would turn out? That is the FINRA arbitration system, only instead of disputes over $600 repairs, its $100,000 of losses — in some cases millions of dollars. What are the odds you will get a fair hearing in this private, opaque, non transparent, literally Wall Street owned system.
Its a national embarrassment, a legal sham. Welcome to the Kangaroo Court of Wall Street . .
Wall Street Justice System Is a Kangaroo Court
William D. Cohan
Bloomeberg, January 12, 2012
US Supreme Court Declines to Hear Standard Investment v FINRA
Sense on Cents January 17, 2012