Federal Court Can't Find Any Basis For FINRA Arbitration Decision In HSBC Managing Director Case

After considering the pleadings, the testimony and evidence presented at the hearing, and any post-hearing submissions, the Panel has decided in full and final resolution of the issues submitted for determination as follows: 

1. Claimant's claims are denied in their entirety.

Rule 13805: Expungement of Customer Dispute Information under Rule 2080  [Ed: highlights added]:

In order to grant expungement of customer dispute information under Rule 2080, the panel must:

(a) Hold a recorded hearing session (by telephone or in person) regarding the appropriateness of expungement. This paragraph will apply to cases administered under Rule 13800 even if a claimant did not request a hearing on the merits.

(b) In cases involving settlements, review settlement documents and consider the amount of payments made to any party and any other terms and conditions of a settlement.

(c) Indicate in the arbitration award which of the Rule 2080 grounds for expungement serve(s) as the basis for its expungement order and provide a brief written explanation of the reason(s) for its finding that one or more Rule 2080 grounds for expungement applies to the facts of the case.

(d) Assess all forum fees for hearing sessions in which the sole topic is the determination of the appropriateness of expungement against the parties requesting expungement relief.

Rule 13904: Awards [Ed: highlights added]:

(a) All awards shall be in writing and signed by a majority of the arbitrators or as required by applicable law. Such awards may be entered as a judgment in any court of competent jurisdiction.

(b) Unless the applicable law directs otherwise, all awards rendered under the Code are final and are not subject to review or appeal.

(c) The Director will serve the award on each party, or the representative of the party.

(d) The panel shall endeavor to render an award within 30 business days from the date the record is closed.

(e) The award shall contain the following:

(1) The names of the parties;

(2) The name of the parties' representatives, if any;

(3) An acknowledgement by the arbitrators that they have each read the pleadings and other materials filed by the parties;

(4) A summary of the issues, including the type(s) of any security or product, in controversy;

(5) The damages and other relief requested;

(6) The damages and other relief awarded;

(7) A statement of any other issues resolved;

(8) The allocation of forum fees and any other fees allocable by the panel;

(9) The names of the arbitrators;

(10) The dates the claim was filed and the award rendered;

(11) The number and dates of hearing sessions;

(12) The location of the hearings; and

(13) The signatures of the arbitrators.

(f) The award may contain a rationale underlying the award.

(g) Explained Decisions

(1) This paragraph (g) applies only when all parties jointly request an explained decision.

(2) An explained decision is a fact-based award stating the general reason(s) for the arbitrators' decision. Inclusion of legal authorities and damage calculations is not required.

(3) Parties must make any request for an explained decision no later than the time for the prehearing exchange of documents and witness lists under Rule 13514(d).

(4) The chairperson of the panel will be responsible for writing the explained decision.

(5) The chairperson will receive an additional honorarium of $400 for writing the explained decision, as required by this paragraph (g).

(6) This paragraph (g) will not apply to simplified cases decided without a hearing under Rule 13800 or to default cases conducted under Rule 13801.

(h) All awards shall be made publicly available.

(i) Fees and assessments imposed by the arbitrators under the Code shall be paid immediately upon the receipt of the award by the parties. Payment of such fees shall not be deemed ratification of the award by the parties.

(j) All monetary awards shall be paid within 30 days of receipt unless a motion to vacate has been filed with a court of competent jurisdiction. Absent specification to the contrary in the award, when arbitrators order opposing parties to make payments to one another, the monetary awards shall offset, and the party assessed the larger amount shall pay the net difference. An award shall bear interest from the date of the award:

(1) If not paid within 30 days of receipt;

(2) If the award is the subject of a motion to vacate which is denied; or

(3) As specified by the panel in the award.

Interest shall be assessed at the legal rate, if any, then prevailing in the state where the award was rendered, or at a rate set by the arbitrator(s).

MR. GROSS' EMPLOYMENT 

5. On September 11, 2020, Mr. Gross' counsel delivered a letter to Jeanine L. McHugh, Esq. detailing Mr. Gross' legal claims asserting that Mr. Gross was retaliated against because he objected to unlawful conduct that constituted investor fraud and federal securities law violations. 

6. The sending of counsel's letter resulted in settlement negotiations that ultimately resulted in a comprehensive resolution of the legal dispute. 

7. The two principle terms of the settlement were: 1) a payment of settlement compensation to Mr. Gross; and 2) HSBC's agreement not to oppose an application by Mr. Gross of expungement of his U-5 that contained a false explanation for his termination from HSBC. 

8. The false U-5 badly compromised Mr. Gross' professional career. 

9. On February 12, 2021 Mr. Gross filed a Statement of Claim with FINRA seeking expungement of his U-5. [For a copy of filed Statement of Claim see Exhibit "A"] 

10. In connection with that Statement of Claim, a FINRA hearing was held on August 27, 2021. 

11. At the hearing, HSBC offered no defense to Mr. Gross' claims. 

12. At the hearing, testified to the events that resulted in his termination including the misconduct HSBC accused him of and why those charges were entirely false. 

13. In particular, Mr. Gross testified that HSBC accused him of communication with a particular prospective HSBC client utilizing unapproved applications. Mr. Gross unambiguously testified that he at no time communicated with that particular person utilizing unapproved application sand further, and in any event, did not discuss HSBC business with that particular person on any occasion. [For a copy of a certified transcript created from a FINRA audio recording of the hearing See Exhibit "B"] 

14. Mr. Gross' testimony that he violated no HSBC internal rules or policies was plain, straightforward, and uncontradicted. 

15. On September 3, 2021, in an entirely unexplained decision, FINRA ruled against Mr. Gross and refused to expunge his U-5. 

16. FINRA's decision was arbitrary and capricious and entirely divorced from any evidence presented at the hearing having no basis in fact or law. 

17. FINRA's decision has badly damaged Mr. Gross' professional career by allowing a false and defamatory reason for termination to remain on Mr. Gross' U-5. 

CAUSE OF ACTION

18. Pursuant to Fed. R. Civ. P. 10(c), plaintiff repeats and realleges each and every

allegation contained in paragraphs "1" through "17" as if repeated and incorporated herein.

19. The FINRA panel acted in utter bad faith and arbitrary and capriciously by failing

to expunge Mr. Gross' U-5.

20. As a consequence of the above, the FINRA panel should be enjoined and required to expunge Plaintiff's U-5.

The FINRA panel provided no explanation for its denial of Gross's petition. Despite FINRA Rule 13805(c), it seems it is "standard" for expungement awards, or the denial thereof, to be "bereft of findings of fact or conclusions of law." 

But "the absence of explanation may reinforce the reviewing court's confidence that the arbitrators engaged in manifest disregard" of the law, especially when the FINRA panel appeared to reach a conclusion -- that Gross's Form U-5 was accurate and should not have been expunged -- that neither side had advocated for. . . . 

Nor can this Court discern, from the record, any basis on which the FINRA panel could have rested its decision. The evidence at the arbitration hearing was undisputed that Gross had not violated HSBC rules or practices. Having reviewed the arbitration submissions, the hearing transcript, and the award, the Court cannot "discern what possible findings the arbitrators could have made that would justify their disposition of the case . . . On remand, the arbitration need not necessarily reach a different conclusion, but it must provide some explanation for its award so that this Court can ensure there has been no manifest disregard of the law.

Way back in pre-Covid 2017, a disgruntled Schwab customer filed a FINRA Arbitration Statement of Claim complaining about the release of his records to the IRS. Then the dispute wound up in federal court. Then back in arbitration -- sort of. Then back in federal court. In 2021, four years after the hostilities began and in the middle of Covid, things moved on to Zoom hearings, but the customer didn't want to argue his case via Zoom. He said that's not what he bargained for way back when things started. As kids used to say like it or lump it, and, accordingly, the parties proceeded to Zoom hearings and Zoom court proceedings. 

FINRA Has NO PART IN DECIDING THE AWARD???????

Finally, but by no means "last but not least," I feel invited by the facts in Cristo to reiterate my often voiced complaint (bordering on derision) with this inappropriate preamble that is inserted without consent into each and every FINRA Arbitration Award, as set forth in Cristo:

Awards are rendered by independent arbitrators who are chosen by the parties to issue final, binding decisions. FINRA makes available an arbitration forum-pursuant to rules approved by the SEC-but has no part in deciding the award.

Court Finds FINRA Arbitration Process Not Fundamentally Fair (BrokeAndBroker.com Blog / February 4, 2022)

http://www.brokeandbroker.com/6265/finra-wells-fargo-arbitration/

You know those days when you just want to pull the covers over your head and not get out of bed? Well, FINRA had one of those days. As to what caused all of FINRA's anxiety, let's start with these words in a court's order about a FINRA public customer arbitration hearing: "The transcripts satisfy the Investors' burden of proving the fraud on the panel by clear and convincing evidence. The audio tapes, which were not available to the Investors until after the close of the hearing, confirm that Wells Fargo' s key witness used the delay caused by the medical emergency to materially change his testimony and offer perjured testimony in direct contravention of the earlier testimony. In addition, counsel for Wells Fargo inserted himself as a fact witness and purported to testify to the Panel himself to support the changed story."

• FINRA Customer Claimant Says Arbitrators Left Out Zeros In Award February 8, 2022
  
  
• Veteran Stockbroker Sues For Unjust Termination Involving Sales Goals and Outside Business Activities November 19, 2021
  
  
• Two of Three FINRA Arbitrators Ironically Disappear In Unexplained Expungement Award November 16, 2021
  
  
• No Margin For Error With Options Expiration November 1, 2021
  
  
• UPDATE: No Rationale And No Explanation In FINRA Arbitration Decision August 18, 2020
  
  
• UPDATE: No Rationale And No Explanation In FINRA Arbitration Decision July 20, 2020
  
  
• Federal Courts Okay FINRA Unexplained Arbitration Decision March 30, 2020
  
  
• No Rationale and No Explanation In FINRA Arbitration Decision October 8, 2019
  
  
• Wells Fargo Banker and Broker Loses Humpty Dumpty FINRA Arbitration  June 24, 2019
  
  
• Wells Fargo Found Guilty of Defaming Stockbroker for Storing Customer Property June 3, 2019
  
  
• Bleak Marshall Family Drama Hits FINRA Arbitration December 4, 2017
  
  
• Absurd Unexplained Public Customer FINRA Arbitration Decision October 20, 2017

• FINRA
• HSBC
• Adam Gross
• FINRA
• Arbitration
• Rule 13904
• Summary
• Explained Decision
• Rational
• Form U5
• U5
• BrokeAndBroker
• Bill Singer