An irreverent Wall Street Blog
Former Merrill Lynch / BOA Employee Wins Dramatic FINRA Expungement
January 29, 2021
Imagine the plight of an associated person, who is accused of the unauthorized opening of a bank account for a client. We can all agree that's not a good blot on your industry record, and it may well derail your career. But what happens if the associated person swears on a stack of bibles that she was asked by the client to open the very bank account at issue? And what if I told you that the bank had determined that the associated person didn't steal or misuse any of the client's deposited funds? You and I, being smart and incredibly attractive folks, would likely make it a point to contact the client and ask for some statement, right? What if I told you that the bank didn't seem to think it needed to take that step? What if I told you that the bank severed its relationship with the client? What if I told you that the bank discharged its employee?
Case In Point
In a FINRA Arbitration Statement of Claim filed in February 2020, pro se Claimant Wigart sought the expungement of allegedly defamatory material from her Central Registration Depository record ("CRD") and her Form U5. Additionally, Claimant sought $50,000 in consequential damages.
In the Matter of the Arbitration Between Colette Erica Wigart, Claimant, v. Merrill Lynch, Pierce, Fenner & Smith Inc., Respondent (FINRA Arbitration Award 20-00635)
https://www.finra.org/sites/default/files/aao_documents/20-00635.pdf
https://www.finra.org/sites/default/files/aao_documents/20-00635.pdf
Respondent Merrill Lynch generally denied the allegations and asserted various affirmative defenses.
Award
The sole FINRA Arbitrator, Dean J. Dietrich, found that the cited language was defamatory and he recommended the expungement of the "Reason for Termination" on Claimant's Form U5 to reflect that she had been "Permitted to Resign." As to the "Termination Explanation," Arbitrator Dietrich ordered that the following replacement language be inserted:
The Associated Person was permitted to resign because the savings account opened at Bank of America by her on behalf of a client was based on the client's authorization.
Additionally, the FINRA Arbitrator ordered further conforming changes expunging references to the underlying occurrence on Claimant's CRD. Finally, and notably, Respondent Merrill Lynch was ordered to pay to Claimant Wigart $50,000 in compensatory damages and $150 in reimbursed filing fees.
Bill Singer's Comment
First and foremost, a thundering round of applause for Arbitrator Dietrich, who drafted a superior Award, which is replete with adequate content and context so as to render it intelligible and compelling.
FINRA's online BrokerCheck records disclose that Merrill Lynch had reported that it had "Discharged" Wigart on August 29, 2018. I'm not going to repeat the "Allegations" because they have been countermanded by the recommended expungement Award. Suffice it to say that Merrill Lynch put Wigart's conduct in a very unsavory light. I'm cutting her some slack here because she was a 26-year industry veteran with a largely unblemished career.
In an effort to burnish my credentials as an online raconteur, I intentionally omitted Arbitrator Dietrich's wonderful "FINDINGS" portion of his Award until this point in today's blog: My goal was to enhance its impact upon an objectionable reader. And now, without further ado, here is the published "FINDINGS":
Claimant was terminated by Respondent because she opened a savings account with Bank of America on behalf of her client in order to deposit her client's proceeds from the sale of her house, allegedly without the client's authorization. Claimant's request for expungement from her U5 should be granted for the following reasons:1. The client was not interviewed by Respondent nor did she sign an affidavit supporting Respondent's allegations.2. The client was known to have cognitive difficulties. On several occasions she complained that certain trades in her account (not by Claimant) were not authorized when in fact they were. Client's financial adviser also testified that "it would not surprise me if she (the client) opened an account and forgot about it". As a result, Respondent terminated her as a brokerage client even though her account balance was in excess of $500,000.00.3. Several former employees of Respondent testified that they were encouraged to open new accounts for clients even if the client had existing accounts with Respondent. The policy regarding the opening of new accounts was ambiguous and not uniformly enforced.4. Claimant only earned $700.00 by opening the account. No reasonable person would have done so had he or she been aware of the severe consequences that would ensue.5. There was no claim that Claimant improperly appropriated funds from the client's account.Claimant requested $50,000.00 in damages. Respondent knew or should have known that by stating in the U5 that Claimant had opened a bank account without the client's authorization she would be unemployable in the banking industry. Indeed, her manager testified he would not hire someone with this statement on her U5. And Claimant testified she had applied for a position at a number of banks with no success despite years of experience in the industry.Under Nevada law, Respondent enjoys a conditional privilege to the charge of defamation, but the privilege can be overcome by a showing of "reckless disregard for the truth" (Bank of America Nevada v. Boudreau 115 Nevada 263 (1999)). The failure of Respondent to interview the client and accept the allegations at face value, despite her well-known memory impairment, and for the reasons cited above demonstrates reckless disregard for the truth and overcomes the privilege.
Wow . . . and wow . . . and wow!!!
Finally, a FINRA Arbitrator who awards damages against a FINRA Large Member Firm in consideration of that firm's "reckless disregard for the truth." As FINRA Arbitrator Dietrich admonishes, Merrill Lynch never, ever interviewed the client at issue notwithstanding the cited concerns. All of which coalesces into the appearance of a large employer throwing an employee under the bus. I mean, for godsakes, at least go through the motions if nothing else -- right?
Ultimately, should Merrill Lynch appeal this Award, I'm not quite sure that the $50,000 in damages will stand up. Personally, I hope it does. Candidly, I hope the court adds one or two zeroes to that award but I know it aint' gonna happen. For now, thank you Arbitrator Dietrich for putting a smile on my face during these pandemic times.