Their FINRA arbitrator was a poet. Two advisors didn’t know it.
The former Alex. Brown representatives seek to vacate a $4.3 million FINRA arbitration award — in part because they say one of the arbitrators should have disclosed his published writings.
Jason Abrahams and Andrew Mandala filed a motion seeking to void the decision on Jan. 16 in Miami-Dade County court. FINRA arbitrators had ruled them liable for compensatory damages plus interest after the firm accused the onetime Deutsche Bank U.S. Private Client Services reps of breaching loan agreements.
In the legal filing, the advisors say Raymond James took over their book of niche clients after it purchased the roughly 200-advisor Deutsche Bank unit in 2016 for $420 million,
The vacate motion contends that one of the three arbitrators, James Scutti, didn’t accurately answer two crucial questions on the required oath form. First, he inadequately disclosed his time as an SEC enforcement lawyer on the form, according to the filing. The SEC time means Scutti was a non-public arbitrator rather than a public one, the motion states.
Abraham and Mandala go on to cite what they say is an equally key inaccuracy: Despite decades of works including a 2015 poem called “Visiting Cold Mountain,” Scutti answered “no” to a section of the oath document asking if he had ever been published in any medium, according to the motion. The advisors referenced a contradictory 2014 interview with Scutti discussing the works.
“Because of Arbitrator Scutti’s misrepresentation and improper classification, this case was improperly heard and adjudicated by a panel consisting of only one public arbitrator and two non-public arbitrators,” the filing says. The award “must be vacated” under Florida and federal laws, it states.
-
The move follows calls for reform. Banned brokers, acting in lieu of attorneys, have made a living for decades representing investors.
January 4 -
Advisors should pay attention to compliance issues and evolving expectations from clients.
January 15 -
Royal Alliance must pay more than $2.5 million to one ex-client while dealing with charges against the firm and a former rep by William Galvin’s office.
January 24
From the SEC to the Supreme Court, here's what could be playing out this year.
Raymond James spokeswoman Shereen McCall declined to comment on the case, and FINRA spokeswoman Michelle Ong cited pending litigation while declining to comment. Scutti said he had no comment, other than that he would “respond in an appropriate way at an appropriate time.”
The advisors, who are partners at Coral Gables-based Stillwater Structured Finance and registered reps with an investment bank-serving broker-dealer called Burch & Co., didn’t respond to inquiries. An attorney representing Abrahams and Mandala also declined to comment beyond an emailed statement.
Their “consistent record of profound success for their institutional clients” before the Raymond James deal “speaks for itself,” said their attorney, Seth Rubinson.
Raymond James “effectively dismantled” the advisors’ prior specialty practice focusing on Caribbean-based institutional investors by reassigning more than half their book and several hundred millions of dollars in assets to other advisors within its fixed-income unit, according to their legal motion.
Prior to Raymond James’ acquisition of the Deutsche Bank unit, the practice “consistently generated multimillion-dollar incomes for Abrahams and Mandala” due to its “special relationships” with large Caribbean institutions “arising in significant part from Abrahams’ Jamaican roots,” the motion says.
They requested damages of $7.8 million in lost income in filing their arbitration claim in in December 2016, just three months
FINRA’s Office of Dispute Resolution removed one of the arbitrators a year into the process, after it discovered that he failed to disclose a disciplinary case, according to documents included as exhibits in the advisors’ filing. The regulator tapped Scutti as a replacement.
An extended bio included in the arbitrator database mentioned the Army veteran’s 4½ years as an SEC enforcement attorney in the 1980s, but he answered “no” to the question of whether he was ever associated with an entity registered under federal securities laws, the advisors’ filing states.
Scutti used “aggressive questioning of Abrahams and Mandala during their direct examinations, going as far to ask both Abrahams and Mandala if they intended to steal Raymond James’ money when they accepted employment with the firm,” the document says.
In a unanimous decision in mid-December, the panel denied their claims in their entirety and found them liable for a combined $4.3 million in compensatory damages and interest. The award came out nearly identical to the firm’s request in its counterclaim and denial of the advisors’ allegations.
Raymond James has not responded to Abrahams and Mandala’s motion to vacate the award in the circuit court for Miami-Dade County. While FINRA arbitration decisions are rarely overturned, a federal judge did vacate a $1 million award
