Wells Fargo Found Guilty of Defaming Stockbroker for Storing Customer Property

Violation of firm's policy for storing investor property, consisting of non-marketable U.S. savings bonds, and other non-investment property.

EXPLAINED DECISION 

The Arbitrator considered the fact that the evidence presented is undisputed, and the fact that Respondent does not oppose the expungement in making her determination on this matter. 

The Arbitrator found that Claimant did not violate "an investment-related statute, regulations, rule, or industry standard of conduct" and that Respondent's statements on sections of Claimant's Form U5 were false. 

Rather, the Arbitrator found that Claimant violated Respondent's internal policy in two respects: Claimant stored personal property of an investor at his residence; and Claimant did not notify Respondent that the investor had "complained" when she inquired about the difference between a "cap" account and a regular checking account. The Arbitrator has made this finding because the property at issue were not "investments" within the meaning of FINRA's rules, and Claimant's conduct had nothing to do with "investments" but, instead, merely with the storage of that property. The property in question included non-marketable U.S. Savings Bonds, expired letters of administration, coins, investment account statements, and other paperwork, which the investor authorized him to take -- in anticipation of a subsequent meeting to discuss the disposition of that property. Thus, Claimant's actions presented no risk to the investor. Claimant carried that property into the office each day, but stored it in his home at night. The investor did not object to Claimant's action, or file any compliant [sic]. Respondent initially stated it did not want the property stored at its location, and returned the property to Claimant, instructing him to take it home and store it there. 

The Arbitrator noted that the same false language was reported in three places on Claimant's Form U5: Section 3 (Reason for Termination), Section 7 (Internal Review Disclosure) and Section 7 (Termination Review Disclosure). The Arbitrator further noted that, while FINRA Rule 8312(d) specifically states that FINRA shall not release on the BrokerCheck Report: (3) "Internal Review Disclosure" information reported on Section 7 of the Form U5; and (4) "Reason for Termination" information reported on Section 3 of the Form U5, it appeared on Claimant's BrokerCheck Report because the same language was reported on the Termination Review Disclosure. 

Finally, the Arbitrator found that the false statements in Claimant's Form U5 and BrokerCheck Report are defamatory as they adversely affect the public opinion of Claimant's character, and he has suffered severe economic impact and damages resulting from those statements. He has "faced significant struggles" in finding employment, a number of firms to which he applied refused to hire him specifically because of these statements on the Form U5, and he has lost several long-term clients because he can no longer service their accounts. Further, because of these false statements released to the public on Claimant's BrokerCheck Report, he has "suffered severe economic impact and damages". 

(d) FINRA shall not release:

(1) information reported as a Social Security number, residential history, or physical description, information that FINRA is otherwise prohibited from releasing under Federal law, or information that is provided solely for use by regulators. FINRA reserves the right to exclude, on a case-by-case basis, information that contains confidential customer information, offensive or potentially defamatory language or information that raises significant identity theft, personal safety or privacy concerns that are not outweighed by investor protection concerns;

(2) information reported on Registration Forms relating to regulatory investigations or proceedings if the reported regulatory investigation or proceeding was vacated or withdrawn by the instituting authority;

(3) "Internal Review Disclosure" information reported on Section 7 of the Form U5;

(4) "Reason for Termination" information reported on Section 3 of the Form U5;

(5) events reported on Section 7 of the Form U5 (other than an "Internal Review Disclosure" event) for three business days after FINRA's processing of the filing. However, if an event is reported on Form U5 and the same event is thereafter reported on Form U4 prior to the expiration of the three-business-day period, FINRA will release the Forms U4 and U5 information simultaneously upon processing. Under such circumstances, the three-business-day period may be curtailed;

(6) the most recent information reported on a Registration Form, if:

(A) FINRA has determined that the information was reported in error by a BrokerCheck Firm, regulator or other appropriate authority;

(B) the information has been determined by regulators, through amendments to the uniform Registration Forms, to be no longer relevant to securities registration or licensure, regardless of the disposition of the event or the date the event occurred;

(7) information provided on Schedule E of Form BD.

SIDE BAR: As is customary for me, I often investigate a given associated person's BrokerCheck record to better understand the content and context of a regulatory settlement/decision or an arbitration decision. In disclosing 1988 events listed on Robinson's BrokerCheck, I want to express my discomfort with noting his 31-year-old shoplifting and discharge because that doubly victimizes him as a result of Wells Fargo's defamation. Ultimately, since the expungement arbitration dealt with an issue of the "storage of property" and Robinson had pled guilty to and been fired for shoplifting (the "wrongful taking of property"), I felt that there was enough relevancy to that background that it may have prompted some concern by Wells Fargo. A takeaway from Robinson's case is that before you file for an expungement, ALWAYS consider the potential collateral effects that may arise from the resulting public, published FINRA Arbitration Decision. It may very well be that Robinson was so angered by Wells Fargo's defamation that he happily incurred the risk of dredging up the 1988 shoplifting incident and attendant discharge. On the other hand, other associated persons may have concluded that they had three disclosures on BrokerCheck and that the expungement of one was not worth the risk of calling attention to the other two embarrassing incidents.

Claimant carried that property into the office each day, but stored it in his home at night. . . . Respondent initially stated it did not want the property stored at its location, and returned the property to Claimant, instructing him to take it home and store it there. . . .

• FINRA
• Arbitration
• Expungement
• Defamation
• Explained Decision
• U5
• CRD
• BrokeAndBroker
• Bill Singer