The Law Planet Blog

Since time immemorial, brokers who left their prior firms have taken copies of customer information. In the "old days", brokers copied their holding pages, new account forms and last monthly statements of their customers. With the advances made in the industry, a broker only needs a customer name, address, account number and phone number to accomplish the transfer. Sure, there's plenty of other data, but it's not needed to effect the transfer. This has been going on since I started as a paralegal in the Prudential-Bache Securities law department in 1983.

The SEC sounds like it wants to change all that. Last month, an administrative law judge held a hearing in a case brought by the SEC against NEXT Financial, a brokerage firm from Texas using the independent contractor model. In that case, the SEC's lawyers maintained that all information is confidential and cannot be transferred without the customer's permission. It is unclear whether this includes names and addresses.

In 2007, we successfully defended two cases brought by major wirehouses against their smaller competitors. In both cases, the firms complained about the transfer of "confidential" information. In both cases, we pointed out the hypocrisy of the argument as those same firms use the same "confidential" information when they recruit from other firms. As I said, this has been going on since time immemorial. The arbitrators in both cases, recognizing that this is the custom and practice in the industry, awarded nominal damages to the wirehouses, not the hundreds of thousands or millions that were sought.

The brokerage industry has been able to deal with this issue, on its own, for years and years. The problem, of course, is that NEXT's alleged conduct was wrong and the firm did not own up to its failings. As we sometimes say in the practice "Bad cases make bad law." From what the SEC alleged, this was a "bad case" and the industry may find itself suffering from its impact.

That's the view from The Law Planet - Jupiter, Florida

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Posted In: Securities Industry , Stockbroker Issues

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The broadcast television world will change on February 17, 2009, when traditional analog television will go "dark." For information on the changeover, see the NAB website DTVAnswers. How does this affect the practice of law, one might ask.

If you received a small portable television, for watching the news, weather or for emergencies, on February 18, 2009, that TV will no longer work, other than as a paperweight. Remember all those "cute" small color TVs that could be held in your hand? Well, they'll be dead, too. So will the TVs that are mounted in your car, RV or your conference room.

The one saving grace is that this applies only to over-the-air broadcasts. Most cable systems, for now, will continue to broadcast both analog and digital signals. If you've never seen an HD broadcast, which is a high definition digital signal, you are missing out on something. The picture and sound quality are better than anything that you've ever seen.

The federal government is assisting in the conversion. The government is giving away 40 dollar coupons that you can use towards the purchase of a digital converter box. You can make old TVs compatible with DTV by purchasing a converter box. The basic boxes are rumored to be priced between 50 and 70 dollars. Simply hook up the box to your antenna and your old TV and "voila" - digital TV. It is reported that even old TVs will display a better picture with digital signals.

Here in Florida, I'm thinking hurricane preparedness. If the power goes out, the cable goes out. If the cable is out, I need to receive over-the-air television. To do that, I have a couple older TVs that will need converter boxes (it's a REALLY BAD IDEA to hook up big screen TVs to a portable generator). So I'll be signing up for the coupons and getting at least one converter box.

That's the rabbit-eared view from The Law Planet, Jupiter, Florida.

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Posted In: Law Practice Management , Legal Technology

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Is it me? The CEO of Merrill Lynch steps way out of line, while presiding over a disastrous business strategy, and he gets $160 MILLION dollars when he's shown the door. In very recent news, the now-former chairman, president and CEO of H&R Block will receive a package worth $2.55 Million, including his health benefits. This kind of corporate gifting to inept CEOs is outrageous.

In our labor and employment practice, we regularly represent individuals who have been terminated for no reason. Under Florida law, absent other circumstances, an employee can be fired "at-will." No $162 Million severance packages to cushion the fall. Sometimes our clients are living paycheck to paycheck when their boss decides that our client is no longer useful. Other times, clients come to us because the boss decided to not pay overtime or their last paycheck. The disparity in treatment is offensive.

What, exactly, did Mr. O'Neal do to deserve the $162 Million? Was it Merrill's expensive failure in the subprime market? Perhaps it was the disastrous purchase of Advest? No, according to press reports, it was neither. He spoke to executives at Wachovia about a possible business combination without the approval of the Board of Directors. I sincerely hope that I can get fired and be paid $162 Million for speaking without permission. It used to simply result in dirty looks from my parents.

And Mr. Ernst from H&R Block, what was his offense? Subprime mortgages, too. He must feel like a piker, only getting 1.5% of the deal that Mr. O'Neal received. My goodness, how will he be able to raise his head in pride at the club?

It was also just announced that Mitchell H. Caplan, the former chief executive of E*Trade Financial Corp., will receive $10.9 million in severance pay. And the cherry on top of his cake is that he is receiving $10,000 to reimburse him for legal fees to negotiate his severance from the firm. And a good thing, too. Otherwise, his severance would have only netted him $10.89 million. That extra $10K could mean the difference between 19" and 20" wheels on his next BMW.

When the pundits say that Wall Street is out of touch with Main Street, they need only look at the obscene severance packages paid to the bigwigs. While foreclosures in this country are trending alarmingly upward, it is unlikely that deposed Wall Street honchos will have that worry. But if you ask the folks that were working in their respective mortgage divisions who are now without jobs, the answer is quite different.

That's the outraged view from The Law Planet, Jupiter, Florida.

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Posted In: Securities Industry

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