Monthly Archives: April 2015

The Importance of A Spot Check

22 Wednesday Apr 2015

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Organizational charts are utilized for many purposes, one of which is it ensure the clear understanding of delegated responsibilities and to whom those responsibilities fall to within the company. President Harry Truman famously had a sign on his desk that read “The Buck Stops Here”, telling America that at the day’s end, the responsibility is his. No finger pointing, no more delegating, just responsibility. The statement is in stark contrast to the well-used phrase “passing the buck”, or said differently, pointing the finger to someone else to take blame for a problem.

While we trust our employees tasked with particular responsibilities will complete them without the need for oversight, it would be naïve to think even the best of employees: (i) do not make mistakes; or (ii) may be unknowingly following an improper course of action. The process of spot-checking your employees and policies, from human resource, compliance or other supervisory position, can exponentially limit your company’s potential liabilities.

By way of example, your human resource department has many responsibilities, from conducting due diligence on new hires to ensuring employee conduct falls in line with the law and the company’s work environment policies. This group is undoubtedly pulled in many different directions.

When a complaint is filed by a former employee against the company, one of my first meetings is with the human resource manager. It is critical to understand the path of the former employee before and during employment with the company.   It is just as important to understand the company’s policies regarding particular conduct of its employees and who is responsible for ensuring the proper implementation of the policies.

And here is where spot-checking comes into play to protect your company. Staying with the human resources example, someone should be taking the time on a regular basis to speak to various members of the department and ask them particular questions regarding the company’s policies.   Someone should be tasked with ensuring those responsible for overseeing and implementing the company’s policies actually know the policies and the applicable law.

The last thing you want is to learn, after a complaint has been filed against your company, its policies are outdated or worse, on point but regularly ignored.   While this responsibility may not be yours now pursuant to the company’s organization chart, it certainly will be once the litigation is a new file on your desk.

The Law Offices of Barry M. Bordetsky represents parties before state and federal courts as well as arbitration forums. If you have questions about an issue you are involved with, please contact Barry Bordetsky at (800) 998-7705 or email barry@bordetskylaw.com.  Nothing herein is a guarantee of results.

FINRA Targeting Senior Investors

21 Tuesday Apr 2015

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The Financial Industry Regulatory Authority (“FINRA”) appears to be targeting seniors – – or at least the brokers that provide financial services to them. This may very well create a new waive of enforcement actions as FINRA seeks the spotlight to inform the public it is out to protect this group of investors. Even if that means protect them from themselves.

FINRA member firms, supervisors and brokers should be proactive to ensure their work with senior investors aligns with suitability requirements, FINRA guidelines and various state statutory requirements. When an account for a senior investor is being opened by a broker, the broker must take note of the client’s age as the information is being included in the new account paperwork. Bells should go off with the broker the new client’s time horizon for investments is significantly shorter than most. What that means is the types of investments that are to be offered must be carefully selected. By way of example, a variable annuity that pays out in 20 years may not be the best of selections as an investment vehicle for an 80 year-old investor. Similarly, in-and-out short term trading most likely should not be the recommended strategy. There are, however, always exceptions.

From a supervisory standpoint, the person responsible for authorizing the opening of the account must take note not only of the new client’s age and corresponding trading strategy, but also should ensure the firm is taking steps to educate brokers on how best to deal with financial strategies involving seniors. FINRA has provided Notice to Members and many, if not all states in the country have statutes designed to protect seniors from predatory brokers. Both supervisors and the brokers should take the time to review FINRA’s writings on the topic and ensure that the recommendations to senior investors are in line not only with the investment objectives on the new account documentation, but also in line with the provisions of FINRA guidelines and state statutory guidelines.

If a broker finds himself working with a large group of senior aged clients, the broker must be very careful to not try to take advantage clientele and begin utilizing a self-created title, such as Advisor to Senior Investors. Again, guidelines are in place as to the titles utilized by brokers, and those representing investors in FINRA arbitrations will utilize the fancy, but unearned titled, to impale the broker’s defense of the case. Similarly, if a supervisor sees a broker’s clientele is growing with this group of investors, there should be an aggressive review of the broker’s work. There should not be an assumption of wrongdoing, but an understanding of the broker’s strategy with each senior client and review as to the suitability of the trading in the account.

The beginning and end of the work should be this for brokers and their employing firms: be smart and aggressive in terms of protecting yourself. That does not mean a broker should not provide the client with the investments sought. What it does mean is the broker, with the assistance of the supervisor, should work directly with the senior investor to ensure the investor has a complete understanding as to: (i) the type of investment being recommended; (ii) the risks associated with the investment; and (iii) the fees and/or commissions that will be generated by the investment.

The Law Offices of Barry M. Bordetsky represents customers and industry members and representatives in FINRA arbitrations as well as before state and federal courts. If you have questions regarding the process, please contact Barry Bordetsky by telephone at (800) 998-7705 or email barry@bordetskylaw.com. The information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

The Critical Importance of A Litigation Hold

20 Monday Apr 2015

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It’s a letter, and the failure to circulate it during the initial stages of a litigation can result in a variety of sanctions from the court, ranging from paying for your adversary’s legal fees to outright striking of your claim or defense.

The letter is called a litigation hold, and it is an internal directive to your company. This directive is utilized regardless of whether your company is the plaintiff or defendant. When there is knowledge of litigation the directive must be sent to the relevant people in the company.

So what is the directive? Simply stated, the litigation hold letter informs key employees of the litigation and directs them that documents, in both electronic and hard copy, are to be maintained and not to be deleted, destroyed, manipulated or otherwise removed from the ordinary course of business.   These “key employees” will have a wide range of different responsibilities at the company, from the General Counsel’s office, the IT department, targeted employees of a complaint and executives who will be playing an important part in the litigation.

This letter plays an important part in the litigation process. It will force a discussion with counsel (outside or internal) to identify: (i) individuals with primary and secondary information relating to the litigation; (ii) custodians of the documents at issue, both electronic and hard copy; (iii) key word searches that may be initially conducted to gain a greater understanding of the issues; (iv) parties responsible for disengaging auto-deletes and other electronically stored processes; and (v) who will be responsible for overseeing the litigation hold process.

By gathering this information early in the litigation process, you will be doing two things. First and foremost, you will be complying with the court’s requirements regarding the preservation of discovery. In doing so, however, you will be putting together the beginning stages of your litigation roadmap. This will guide you with respect to the discovery you will be seeking in the case, that which you will be providing to the other side, and that which may or may not be troublesome to you. It is this last point that is a critical to your case. If the proverbial smoking gun document exists in your files, whether it falls in your favor or not, it is something you, your executives and outside counsel must know of from the outset of a case.

Litigation can be a very expensive process. The last thing you want or need is to be sanctioned by a court because you failed to put a litigation hold letter in place. If you detest your adversary, imagine how it will feel to write a check to cover your adversary’s legal expenses associated with your failure to ensure discovery was preserved in your own files.

By instituting a litigation hold directive immediately upon learning of a lawsuit – – or the threat of a lawsuit, you take the first steps to protect your company – – from itself, your adversaries or even the court.

A Smart Start With A Mediation Pre-Requisite

03 Friday Apr 2015

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Arbitration clauses became a tool of corporations for a variety of reasons. One, an arbitration is a forum where the claims are not publicly filed or readily accessible to anyone trying to find problems where none exist. Two, arbitration generally carries a far lesser cost than a state or federal court case. And three, parties maintain much more control over the process in an arbitration than they do in courts. To require arbitration of disputes, companies inserted contractual clauses requiring “any and all disputes to be arbitrated” before a specific arbitration forum.

New Jersey courts have recently set upon a course of conduct to nullify such arbitration provisions, setting aside arbitration clauses and forcing parties to spend exponentially more money on a case. This often results in disputes with employees or third parties in the public view.

There is a tactical and practical solution that far too many company’s fail to utilize before getting to this point: a mediation pre-requisite into your contracts. What does this do? Most importantly, before any claim is filed, you now have the opportunity to have the claim presented; to or from you. This gives you the chance to assess the risk of moving forward from a legal and business prospective.

Even where the dispute is one you know from the outset will not settle, mediation as a condition precedent should be utilized. With a pre-filing mediation you have the opportunity to sit in a much friendlier setting across from the person who will become your adversary. Unlike in a litigation or arbitration cross-examination, in mediations you can ask any question and assess how the person across the mediation table will appear as a witness. Early answers to the following questions can be critical in determining how you proceed: Can the person be shaken easily? Will the person garner sympathy as a witness? Is the person prone to hyperbole? Where and what are the holes in the story?

Parties, particularly when they are individuals, want to be heard. And my advice: let them talk … as much as possible. Let them have their moment before you as well as with an independent mediator who will then provide you with an assessment of the case.

Similarly, you learn about counsel for the adverse party. In addition to learning your potential adversary’s litigation skills, you will have the opportunity to have face-to-face time, building a relationship that may be necessary down the road should the matter devolve into an arbitration or litigation.

There is no such thing as a failed mediation. One way or the other, with a pre-filing mediation requirement, you are going to leave the day with substantially more control, whether resolution or preparation for things to come, then you would have had if the case is filed by or against you from the outset.