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FINRA Arbitrators Deem CRD / U5 Disclosures Defamatory

March 19, 2018

It's one of the most common questions asked of industry lawyers when approached by an angry former employee looking to sue the former employer firm: Can I win? Hand in hand with such a preliminary query are the questions of how much is my case worth and is there anything you can do about that crap they posted on my Form U5? A recent FINRA Arbitration answers some of those nagging questions. Whether or not the answers are satisfactory depends on a number of factors.

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in August 2016 and as amended thereafter, Claimant Clark asserted defamation in connection with allegedly false and defamatory statements filed on his Form U5. Claimant sought $3 million in compensatory, punitive, and exemplary damages. Further, Claimant sought the expungement of the cited language from his Form U5. At the times relevant to this arbitration,, Claimant Clark was employed by BOSC, Inc. but that firm purportedly changed its name to BOK Financial Securities, Inc. In the Matter of the FINRA Arbitration Between Christopher Rolfe Clark, Claimant, vs. BOK Financial Corporation, BOKF N.A.; BOK Financial Securities, Inc.; and BOSC, Inc.;, Respondents (FINRA Arbitration 16-02352, March 12, 2018).

Respondent BOK Financial Securities f/k/a BOSC generally denied the allegations and asserted various affirmative defenses.

No Deterrminations

Respondents BOK Financial Corporation and BOKF N.A. are not members or associated persons of FINRA and did not voluntarily submit to arbitration. Accordingly, the FINRA Arbitration Panel made no determination with respect to those two respondents.

Award

The FINRA Arbitration Panel found Respondent BOKFS f/k/a BOSC liable to and it to pay to Claimant Clark $300,000.00 in compensatory damages at 5% interest from August 17, 2015, until paid in full. Respondent shall also pay to Claimant a $600 fee reimbursement.

The Panel assessed in part the following fees:

against Claimant: $1,400 postponent fee; $125 contested motion for issuance of subpoenas fee; and $2,325 in hearing sessions fees

against Respondent: $3,025 member surcharge; $6,175 member process fee; $125 contested motion for issuance of subpoenas fee; and $14,925 in hearing sessions fees.

Expungement

In addressing Claimant Clark's expungement request, the FINRA Arbitration  Panel found that the disclosure was defamatory. Although the Panel left the CRD "Reason for Termination" unchanged, the arbitrators recommended that the CRD "Termination Explanation" be replaced with the following disclosure

Difference in investment philosophy


Bill Singer's Comment

Although not an earth-shaking case and clearly not a dispute that's breaking new ground, the BrokeAndBroker.com Blog offers this matter to confirm that, yes, former associated persons can and do "win" these types of employment cases.$3,850 We also offer today's case for the proposition that FINRA Arbitration Panels can and do find that member firms do not always post fair and accurate disclosures on their former associated person's industry records -- in Clark the arbitrators found the offensive CRD commentary to have been defamatory.

As to whether Claimant Clark was happy with the outcome of his case, well, that's always a tough thing to infer from merely reading a FINRA Arbitration Decision and the best way to answer such a question would be to ask the litigant. We know that Clark sought $3 million but was awarded about a tenth of what he demanded; on the other hand, lawyers are known to add a zero or two . . . or three to any demand for damages. Finally, in addition to whatever legal fees, costs, and expenses Clark may have incurred, the cost of "winning" came with a FINRA price-tag of $1,400 plus $125 plus $2,325, for a total of $3,850. 

In the end, when the bell has rung, when the fighters retire to their corners awaiting the decision, they are often reminded of every glove that laid them down or cut them till they cried out. And, in keeping with the lyrics of a wonderful Simon and Garfunkle song, when the bout is over, you may feel as if all you walk away with is a pocket full of mumbles, such are promises . . . all lies and jests . . .

Download a PDF copy of  Bill Singer Esq's analysis of FINRA's Expungement Rules

  • FINRA Rule 2080: Obtaining Customer Dispute Expungement
  • FINRA Rule 2081: Prohibited Conditions Relating to Expungement of Customer Dispute
  • FINRA Rules 12805 and 13805: Expunging Customer-Dispute Information Under Rule 2080

READ the BrokeAndBroker.com Blog Expungement Archive

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