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FINRA Arbitrators Get Wright Wrong In BB&T Defamation Expungement

August 6, 2019

Any seasoned litigator will tell you that sometimes a client wins by losing and loses by winning. It's all very nuanced. You can be found guilty but ordered to pay a fraction of what was demanded in the last settlement offer. You can win but the legal fees bankrupt you.  When it comes to the walking-wounded emerging from litigation, it's often tough to discern who won and who lost. It seems like everyone is limping. A recent FINRA intra-industry arbitration presents an example of how a party won her claim but still looks banged-up for the effort.

Case in Point

In a FINRA Arbitration Statement of Claim filed in August 2018, associated person Melissa L. Wright asserted tortious interference with prospective business relationships; defamation; gross negligence; and negligence. Claimant Wright asserted that following her employment with Respondent BB&T, the firm intentionally or recklessly published false and defamatory information on both her Uniform Termination Notice for Securities Industry Registration (the "Form U5") and Investment Adviser Representative Public Disclosure Report ("IARD"). Claimant sought the expungement of her industry record and $1,138,016.04 in compensatory damages, punitive damages, interest, fees, and costs. In the Matter of the Arbitration Between Melissa L. Wright, Claimant, v. BB&T Securities, LLC f/k/a BB&T Investment Services, Inc. Respondent (FINRA Arbitration Decision 18-03051).

The parties settled the lawsuit and, thereafter, Respondent BB&T did not oppose the requested expungement. Having found the language at issue to be defamatory, the FINRA Arbitration Panel stated, in part, the following:

The Panel recommends the expungement of the Reason for Termination and the Termination Explanation in Section 3 of Melissa Lynn Wright's (CRD# 3260659) Form U5 filed by BB&T Securities, LLC f/k/a BB&T Investment Services, Inc. on August 29, 2017, and maintained by the CRD. The Reason for Termination shall be changed to "Other." The Termination Explanation shall be replaced with the following language: "Ms. Wright was discharged because BB&T Securities, LLC viewed that Ms. Wright did not follow policy in a matter unrelated to the purchase or sale of securities. Ms. Wright refuted BB&T Securities, LLC's assertion and the matter was settled." 

The Panel further recommends the expungement of the "Yes" answers to Questions 7B and 7F(1) on Melissa Lynn Wright's Form U5 filed by BB&T Securities, LLC f/k/a BB&T Investment Services, Inc. on August 29, 2017, and maintained by the CRD. The "Yes" answers shall be changed to "No" and the accompanying Disclosure Reporting Pages shall be deleted in their entirety.

Bill Singer's Comment

As of August 6, 2019, online FINRA BrokerCheck records disclose that BB&T had "discharged" Wright on August 7, 2017, based upon allegations that:

In her roles as bank employee, Ms. Wright instructed a branch banker to open a checking account for an existing bank client without the client's authorization.


Against that current disclosure, the FINRA Arbitration Panel's proposed revision is:

Ms. Wright was discharged because BB&T Securities, LLC viewed that Ms. Wright did not follow policy in a matter unrelated to the purchase or sale of securities. Ms. Wright refuted BB&T Securities, LLC's assertion and the matter was settled.

An independent panel of three FINRA arbitrators found BB&T's disclosure to be "defamatory." Apparently, the arbitrators concluded that BB&T had wrongfully alleged that Wright had instructed a banker to open an account for a bank client without that client's authorization. The arbitrators recommend a revision of the defamation that includes BB&T's "refuted" allegation that Wright "did not follow policy." 

What did (or didn't) Claimant Wright accomplish by purportedly winning her case? 

In an effort to illustrate my displeasure with the Panel's proposed revision, let's imagine that:

XYZ Broker Dealer believes that while acting in his role as a bank employee, Reggie Repp murdered a customer without justification. Accordingly, XYZ fires Repp. Thereafter, it turns out that no client was murdered, the client is still very much alive, and no criminal charges were ever filed against Repp. 

In the hypothetical above, one would anticipate XYZ filing the following Form U5 disclosure (consistent with Wright):

Ms. Repp was discharged because XYZ viewed that Mr. Repp did not follow policy in a matter unrelated to the purchase or sale of securities. Mr. Repp refuted XYZ's assertion and the matter was settled.

We would anticipate that in response to Repp's seeking an expungement of the above defamation,  the arbitrators in Repp's case would recommend the revision of the hypothetical U5 language (consistent with the approach of the Wright Panel) by suggesting this:

Ms. Repp was discharged because XYZ thought that Mr. Repp had murdered a client, which was a matter unrelated to the purchase or sale of securities. Mr. Repp refuted XYZ's assertion, produced proof of his exoneration, and the matter was settled.

Maybe it's me (and it often is) but I think that in Wright, the Panel should have recommended no language be provided as Wright had been "discharged" in error. That would be consistent with the Panel's recommendation that the "Reason for Termination" be revised from "discharged" to "Other." If that is not a satisfactory regulatory option, then the following proposed language would more fairly describe the issues:

Ms. Wright was discharged because BB&T Securities, LLC erroneously viewed that Ms. Wright did not follow policy in a matter unrelated to the purchase or sale of securities. Ms. Wright refuted BB&T Securities, LLC's assertion; the Panel has determined that BB&T defamed Wright in its description of events that prompted her discharge;  and, thereafter, BB&T entered into a settlement with Ms. Wright.


Finally, I do appreciate the irony that in order to criticize the prior publication of BB&T's defamatory disclosure about Wright that this article is re-citing that defamation in order to make the point. 










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