An irreverent Wall Street Blog
FINRA Arbitrators Order Stockbroker to Disgorge Future Bonuses to Ameriprise
August 30, 2019
There is a mystique surrounding those litigants who enter the ring without a lawyer. Perhaps its something in the American ethos that we tend to love underdogs. Yes, we use words like "ethos" in the BrokeAndBroker.com Blog. We also use expressions like WTF. Indeed, this is a very eclectic online publication -- and, no, "eclectic" is not a pastry filled with custard and dipped in chocolate. In any event, getting back to that American ethos crap, we all seem to root for the pro se party who either can't afford a lawyer or opts not to hire one. Sometimes, our hero saves the legal fees and comes out a winner; other times, well, read about today's FINRA arbitration.
Case In Point
In a FINRA Arbitration Statement of Claim filed in November 2018 and as amended, FINRA member firm Claimant Ameriprise asserted unjust enrichment arising from the alleged breach of two promissory notes and an Independent Advisor Franchise Agreement. Ultimately, Claimant Ameriprise sought $487,958.49 in principal and interest on a Transition Note dated October 23, 2015, and a Working Capital Note dated October 29, 2015, plus interest, fees, and costs. In the Matter of the Arbitration Between Ameriprise Financial Services, Inc., Claimant, v. Randolph William, Respondent (FINRA Arbitration Decision 18-03999)
http://www.finra.org/sites/default/files/aao_documents/18-03999.pdf
In addition to the monetary damages, Claimant Ameriprise sought:
Permanent injunctive relief in the form of an order directing Respondent to make a legally enforceable request to any new or subsequent employer to disgorge any bonuses to Claimant in order to repay all amounts owed to Claimant by Respondent under the Transition Note;
Former associated person Respondent William, who represented himself pro se
advised that Claimant's claim was true to fact and that his intentions were to start paying back the notes as soon as he could.
Ummmm . . . oh, my . . . like, you know, that's not all that great a defense.
Award
On May 3, 2019, Claimant Ameriprise submitted a Motion for Judgment on the Pleadings, to which Respondent William did not file a reply. The FINRA Arbitration Panel granted Claimant's Motion; and, further, the Panel found Respondent liable to and ordered him to pay to Claimant Ameriprise:
- $487,958.49, including the amount for a negative compensation balance, as principal and interest owed;
- pre-judgment interest of 16% per annum on the outstanding Transition Note balance, equaling $128.21 per day from August 20, 2018 until the date of this award.
- pre-judgment interest of 6.25% per annum on the outstanding Working Capital Note balance, equaling $33.03 per day from August 20, 2018 until the date of this award.
- post-judgment interest on the outstanding Transition Note balance (the sum of $293,243.13) at a rate of 16% per annum starting 30 days from the date of this award until the award is paid in full.
- post-judgment interest on the outstanding Working Capital Note balance (the sum of $192,912.78) at a rate of 6.25% per annum starting 30 days from the date of this award until the award is paid in full.
- $7,285.60 in attorneys' fees
- $1,000.00 to reimburse Claimant for the non-refundable portion of the filing fee previously paid to FINRA Office of Dispute Resolution.
Bonus Disgorgement
Additionally, the Panel granted permanent injunctive relief to Claimant Ameritrade:
requiring Respondent to make a legally enforceable request to any new or subsequent employer to disgorge any bonuses to Claimant in order to repay all amounts owed to Claimant by Respondent under the Transition Note.
Ouch! Not only did Respondent William lose but he also managed to get hit with a fairly unusual injunction that will require him to pretty much forfeit future bonuses until such time as he's paid off what looks like well-over a half-a-million bucks in damages, fees, and costs. Not sure that I've seen that "bonus" disgorgement before, but, geez, that's a pretty clever (and painful) sanction.
I'm hoping that our pro se Respondent William consulted with a bankruptcy attorney.
I'm hoping that some lawyer will counsel Respondent William on the difference, if any, between a "bonus" and an "Employee Forgivable Loan ("EFL")." After all, when it comes to suing its reps to recover unpaid balances on EFLs, every Wall Street brokerage firm argues that an EFL is NOT a bonus! Which makes you wonder whether William could negotiate an affiliation agreement with a new employer and ask that any proposed bonuses be converted into EFLs (so as to avoid falling under the FINRA Panel's injunction). Not saying that's legal. Not saying it's not. Not saying it comports with the FINRA Arbitration Panel's Award. Not saying it's not. Just sayin' . . .