I looked into the internal investigations that companies do when employees complain about sexual harassment and other workplace inequities. You can read the piece in The New York Times here.
The New York Times
Former Morgan Stanley Broker Sues Over Arbitration Policy
A former broker at Morgan Stanley has filed a class-action race-discrimination complaint against the company, accusing it of making “an end-run around the civil rights laws” with a new policy that bars employee participation in class actions and forces civil rights claims into private arbitration.
Kathy Frazier said in her complaint that African-Americans were underrepresented in the ranks of brokers at Morgan Stanley and were paid “substantially less” than their counterparts.
Ms. Frazier previously worked at Goldman Sachs and Merrill Lynch and has an economics degree from Amherst College and a master’s degree in business administration from the University of Pennsylvania’s Wharton School of Business. I wrote about Morgan Stanley’s new policy for The New York Times DealBook. You can read the story here.
S.E.C. and First Eagle Investment Reach $40 Million Settlement
The Securities and Exchange Commission said on Monday that it had reached a $40 million settlement with a New York-based investment adviser over charges that it had improperly used mutual fund assets to pay brokerage firms for the marketing and distribution of its funds.
The case against the investment adviser, First Eagle Investment Management, is the first brought against an asset manager under an SEC initiative that aims to protect fund shareholders from paying for marketing expenses that should come out of the firm’s own assets.
I wrote about the settlement for The New York Times DealBook. You can read the story here.
Years of Overlooked Red Flags Catch Up to Stockbroker
Finra, the securities regulator that’s funded by Wall Street, got some attention last week when it said it was getting tougher on bad stockbrokers. The regulator said fines were going up and sanctions for fraud and the sale of unsuitable products were getting more onerous.
But Finra already had sanction guidelines that might have come to play in the case of Jerry A. Cicolani, Jr., a former broker who worked at Merrill Lynch and at Cleveland’s PrimeSolutions Securities Inc. Somehow, though, despite having been target of 69 customer complaints over the past 13 years, Cicolani wasn’t barred from the business until last September.
By that time, criminal authorities already were moving in with an investigation into his role in a Ponzi scheme. On May 1, he pleaded guilty to two criminal counts, including the sale of unregistered securities. He persuaded many of his former clients from Merrill and PrimeSolutions to invest in that scheme. I wrote about Cicolani in my story yesterday for The New York Times. You can read it here.
Antilla 2015 Awards
Earlier this month, the New York press club The Society of the Silurians said I’d won its “Excellence in Journalism” award for my online columns for TheStreet.com.
From the judges: “In these searing columns, Antilla highlights the anti-consumer sentiment that has taken hold of significant portions of the Republican Party as it attempts to distance agencies such as the Consumer Financial Protection Bureau.”
My stories also have been entered into the national competition for The National Federation of Press Women, which said this week that I’d won first place in two of its “at-large” contests, which include 27 states that don’t have direct affiliations with NFPW. One winning entry was for my columns for TheStreet about the fleecing of senior citizens by stock brokers. A second winning entry was in the feature category, for my article in The New York Times about sex discrimination at Sterling Jewelers, the biggest retail jewelry operation in the United States. The winners in the “at large” categories have been entered into NFPW’s national competition.
Internal Memo at Sterling Jewelers: Men Make 12.5% More Than Women
In the ongoing gender discrimination case against Sterling Jewelers, owner of Kay Jewelers, Jared the Galleria of Jewelers and 10 other chains, an arbitrator this week released a 118-page opinion that moves the fight to a new stage and reveals new information about pay disparities and sexual harassment.
Kathleen Roberts, a former U.S. magistrate judge and an arbitrator at JAMS in New York, said that the women may proceed as a class with their claim challenging Sterling’s pay and promotion practices. She declined to let them proceed with another claim of intentional discrimination.
Because it’s private arbitration, most of the documents are not public. But the law firm for the women was permitted to post Judge Roberts’ opinion so that the thousands of women in the class would have details about this next stage in their case.
The judge referred to several internal company memos that show that Sterling has been aware of pay disparities between men and women for years. From my story in The New York Times on Feb. 3:
In her ruling, the judge cited an internal company memo from 2006 that said female hourly sales employees made 40 cents less an hour than their male counterparts on average, adding up to more than seven million annual affected hours. A memo the next year said that men at Sterling’s stores, which include Jared the Galleria of Jewelry, were paid 12.5 percent more base pay than women and that women at the management level were getting higher performance scores but receiving lower pay increases than men.
The judge also talked about evidence of sexual harassment. More from my NY Times story:
Women in some cases were expected to undress publicly at company events and “accede to sexual overtures,” the judge wrote. She cited evidence of “references to women in sexual and vulgar ways, groping and grabbing women” and soliciting sexual relations, sometimes as a quid pro quo for job benefits.
You can read my story here. The judge’s opinion is here. And a story that I wrote for The Times about the case last year is here. Sterling has 1,700 stores in all 50 states. Chances are you’ve done business with some of these guys at your local mall.
In Push for Change, Finra Is Opposed by the Wall St. Firms It Regulates
Brokerage firms are up in arms over a proposal by one of their regulators to collect information about customers’ accounts and use it to keep tabs on salespeople.
That may sound like a great idea on the face of it, but the regulator in question, the Financial Industry Regulatory Authority, or Finra, gets its funding from the firms it’s supposed to be regulating. And those firms don’t like the idea of sharing data on their customers’ buys, sells and portfolio positions.
I wrote about the battle between Finra and its members in The New York Times today. Barbara Roper, director of investor protection at the Consumer Federation of America, told me that Finra’s proposal to get monthly data about activity in investors’ accounts could go a long way in preventing fraud because it would let Finra jump on problems more quickly:
“It creates a real deterrent,” she said. “Who’s going to churn an account if it immediately sends off a warning siren at Finra?”
You can read the story here.
Brokers Countersue to Thwart Suits by Unhappy Investors
So your broker sold you some shoddy private placements and you sued? Brace yourself, because you might get sued back.
In The New York Times today, I told the story of investors who sued their brokers for selling them private placements that tanked only to be hit with a suit from the broker. The firms’ argument: That the customers signed indemnification agreements when they purchased the securities, and thus owe the firms money for legal fees and other costs.
“The investors make representations to buy these things” and have a legal obligation to be truthful, said Vincent D. Louwagie, a Minneapolis lawyer who represented the brokerage firm Berthel Fisher.
It’s tough to evaluate the cases when the firms win. If you do business with a brokerage firm, you are stuck in private arbitration, where nobody has to explain how they came up with a decision. Suffice it to say, though, that a lot of customers will get spooked when they find out they’re threatened with a countersuit after they already have lost money. You can read the story here.