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FINRA Arbitration Attorneys Declare Deutsche Bank Manager “Reprehensible”

Tuesday, January, 3, 2012

In the FINRA arbitration, StephenColavito,Claimant,vs.DeutscheBankSecurities,Inc.,Respondent(FINRA Arbitration 10-01557, December 27, 2011), the arbitration attorney panel ruled against Deutsche Bank Securities, adding that the behavior of the Managing Director involved in this case toward the Claimant was “reprehensible.” This particular statement, along with the size of the arbitration award, may seem on the surface to be gratuitous, so an examination of the facts is needed to find out why they would say such a thing.


The Arbitration Panel's Decision


What was found in the hearing is that through a Managing Director in Deutsche Bank Securities' Global Markets division, Deutsche Bank completely prevented Stephen Colavito from doing business with institutional clients whether or not they were covered by the Managing Director's division. It was also done without respect to whether or not Colavito was actually generating revenue for the company. In other words, there was no viable reason to cut Colavito off from these clients—it was either sheer malice or favoritism.


Book Poaching A Major Cause of Arbitration Hearings


This practice, also known as “book poaching,” is a problem that runs rampant through Wall Street. Clients change companies, firms get acquired, merged with others or go out of business altogether. Multiple brokers and traders begin working the same accounts. The net result? Brutal competition.


The Machiavellian mechanizations do not end on the ground level. In fact, managers and directors may even play individual brokers against each other. The stated reason they may have is to increase productivity by building competitiveness. The problem is, of course, once the kid gloves are off, ethics go out the window, and someone is likely to find himself or herself cut off from all their clients.


Needless to say, the FINRA arbitration attorney panel may not have been too far off the mark by saying, “Reprehensible.”