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E*Trade Employee Wins Form U5 Expungement

April 14, 2016

Many things get swept under the phrase "personality differences with management." Generally, you start with the premise that most or all bosses are jerks and that takes you to the belief that most or all employees are idiots. From that volatile mix of ingredients we shake or stir a cocktail that prompts lots of employment based litigation. If the boss has the proverbial hard-on for you, you may find your good name defamed via lousy references or retaliatory regulatory filings. What was legitimately a personality difference suddenly morphs into allegations against you of fraud, dishonesty, hostile workplace, and all sorts of other fabrications of the truth. When time passes and an employee tries to get the nastiness removed, he or she may find that the former firm is still angry and not disposed to any concession. Consider a recent FINRA arbitration in which a former E*Trade employee seeks an expungement of his Form U5.

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in July 2015, registered representative Claimant Bingham, appearing pro se, sought an expungement of his Uniform Termination Notice for Securities Industry Registration ("Form U5") as filed on May 16, 2013, by Respondent E*Trade. In the Matter of the FINRA Arbitration Between Andrew Richard Bingham, Claimant, vs. E*Trade Securities LLC, Respondent (FINRA Arbitration 15-01890, March 29, 2016).

Respondent E*Trade generally denied the allegations and asserted various affirmative defenses.

That's it folks. That's all the FINRA Arbitration Decision says about the facts in dispute and the legal issues for this arbitration.Period. End of story. Nada mas. Claimant wanted his U5 expunged. What was said on the U5 and why the statements were deemed objectionable by Claimant are not set forth in the Decision.

On Consent

On February 10, 2016, the parties submitted a Consent Motion and Proposed Order to terminate the scheduled evidentiary hearing dates and to propose new language to include in Section 3 of Claimant's Form U5. Thereafter, the FINRA Arbitration Panel left the "Reason for Termination" as initially filed by Respondent E*Trade but recommended the expungement of the "Termination Explanation" from Section 3 of Claimant's Form U5 to the following:

Difference in personality with manager that led to tardiness and, at times, a negative disposition towards customers, which was not reflected in his productivity. Non sales practice, non compliance related.

As admonished in the FINRA Arbitration Decision:

These recommendations are made with the understanding that Claimant Andrew Richard Bingham must obtain confirmation of this award from a court of competent jurisdiction before the CRD will execute the expungement directive. The Form U5 is not automatically amended to include the changes indicated above. Claimant Andrew Richard Bingham must forward a copy of the court order to FINRA's Registration and Disclosure Department for the amendments to be incorporated into the Form U5.

Bill Singer's Comment

Lest my esteemed readers think that I am dense (which, alas, many of you do), let me assure you that "I get it." If, in fact, you have been defamed on your Form U5, the whole point of the expungement hearing is to try and get the libelous language removed from the document. Consequently, when a FINRA Arbitration Panel is attempting to right a wrong, what's the point if in doing so, the arbitrators re-state the defamatory language -- which will now survive forever on the pages of the FINRA Arbitration Decision.

See . . . like I told ya . . . I ain't dense . . I get it.

On the other hand, sometimes it's helpful to show what was wrongly said about you because in our industry folks have a tendency to engage in pay-back. The evening of the score may often occurs in off-the-record conversations among compliance staff at a "former" firm with their counterparts at a "new" firm. We got lots of pals and former colleagues all over the Street. If you sued your former firm in an expungement proceeding, for example, someone at the former firm may have their nose out of joint.  Sure, the FINRA arbitrators recommended that the nasty stuff  be deleted from your Form U5 but, just between you and me, keep this on the hush-hush, off-the-record, you know, let me clue you in on what really happened this this jackass. In such cases, you might actually benefit from having the FINRA Arbitration Decision spell out what was defamatory so that it's carved in stone for all future employers to see and so you have a fighting chance at countering all the off-the-record slams and the erroneous inferences. No . . . not always, I'll give you that, but sometimes; and, if it is "sometimes," then you should carefully consider what's best for you.

In Bingham, one can only wonder what the hell was on the originally filed Form U5 because the arbitrators came up with an alternative that brands the Claimant as someone who was tardy and evidenced a "negative disposition towards customers."  Frankly, that doesn't strike me as much of a victory for Bingham and only made me wonder what the original filing said. 

Sure, Claimant Bingham gets the positive commentary that he did not engage in sale practice or compliance misconduct, but that suggests that such allegations may have been in the original filing. Further, the overwhelming tone of the proposed revision seems quite negative in that it grudgingly concedes that although Claimant was late at times and had a negative disposition towards his clients that, well, you know, it didn't affect his productivity and, ummm, well, how should we put it, this whole thing was somewhat engendered by a personality difference with his manager. 

Like I said, doesn't strike me as that great a victory for Bingham but Claimant may feel quite different about that. Notwithstanding his views, Claimant still has to incur further costs and delays because the Decision merely conveys a recommendation by the arbitrators. To realize the expungement, Bingham, who acted pro se, has to find a way to get before a judge in a court and obtain a judicial confirmation. Thereafter, Bingham has to submit the whole shebang to FINRA and CRD. 

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