FINRA Has Some 'Splaining To Do As Arbitrators Deny Gender Discrimination Claims

In a recent intra-industry FINRA arbitration, registered representative Claimant Johnson asserted "gender discrimination" among her causes of action -- and that in an industry with a sordid history of gender discrimination against women. Given Johnson's assertion of gender discrimination and the all-male composition of the FINRA Arbitration Panel, it is troubling that more verbiage is expended in the Award on informing us that Respondents are "not liable for gender discrimination" than informing us exactly which causes of action the Respondents were found liable for. 

Case In Point

In a FINRA Arbitration Statement of Claim filed in February 2020 and as amended, associated person Claimant Johnson asserted breach of contract; promissory estoppel; fraudulent inducement; fraud; breach of the implied covenant of good faith and fair dealing; conversion; accounting; unjust enrichment; failure to pay wages in violation of Connecticut General Statute § 31-71a, et seq. against Bank Street; gender discrimination and retaliation; failure to pay wages in violation of Connecticut General Statute § 31-71a, et seq.; gender discrimination and retaliation; and defamation. Claimant Johnson sought

• a declaratory judgment that an oral agreement granting Claimant 1.67% equity interest in Bank Street was valid and enforceable, and 
• the expungement of her Form U5.

In the Matter of the Arbitration Between Amy Johnson, Claimant, v. The Bank Street Group, LLC, Richard S. Lukaj, and James H. Henry, Respondents (FINRA Arbitration Award 20-00608)
https://www.finra.org/sites/default/files/aao_documents/20-00608.pdf

Respondents The Bank Street Group, Lukaj, and Henry generally denied the allegations and asserted affirmative defenses. 

The FINRA Arbitration Award states that at the conclusion of the hearing, Claimant requested:

compensatory damages for three years of discriminatory, inequitable compensation pursuant to the Equal Pay Act and the Connecticut Equal Pay Act in an amount not less than $1,800,000; back pay compensatory damages totaling $1,166,000; liquidated damages pursuant to the Fair Labor Standards Act for willful conduct in the amount of $1,800,000; prejudgment interest for gender discrimination; attorney’s fees; wages and bonuses owed in the approximate amount of $1,230,625; breach of contract damages representing equity interest in Bank Street in the amount of $887,369 based on expert testimony; and expungement.

Award

The FINRA Arbitration Panel found Respondents jointly and severally liable to and ordered them to pay to Claimant Johnson $510,666 in compensatory damages plus $375 in reimbursed filing fees. Additionally, in recommending expungement of Claimant's Form U5 and Central Registration Depository record ("CRD"), the Panel stated in part that:

[T]he Reason for Termination shall remain the same and the Termination Explanation shall be deleted in its entirety and replaced with the following language: “Ms. Johnson was presented with a revised employment agreement and equity participation grants on 10/10/18 which, if accepted, would have modified the economic provisions between her and the firm. Bank Street Group advised Ms. Johnson that her continued employment required acceptance of the agreement. Ms. Johnson refused to accept those terms and was terminated.” This directive shall apply to all references to the Termination Explanation.

In reaching its decision, the Panel provided the following rationale as set out in the "Arbitrators' Explaination [sic] of Decision" :

Respondents, Lukaj and Henry, represented to Claimant that she was to receive a 1.67% equity stake in Bank Street, consistent with equity promised to several other employees. Mr. Lukaj reiterated that promise at several points during her tenure. Claimant, in reliance upon that promise, continued her employment. The Panel, having no other expert testimony to consider, other than that of Claimant’s expert, utilized certain of the analysis provided by Claimant’s expert. Specifically, the Panel considered the Market Approach, but limited it to firms specifically identified as providing investment banking services. The Panel also adjusted the valuation based on the contingencies present in the circumstances of the identified transactions. Accordingly, Respondent Bank Street is found to be liable for and shall pay Claimant the amount of $510,666.00.

Respondents are not liable for gender discrimination or any of the other causes of action alleged related thereto.

Claimant’s Form U5 shall be expunged and revised inasmuch as the information currently set forth therein is false. The Panel finds that the agreement that Claimant refused to execute would have modified the economic provisions between Claimant and Bank Street and, as such, the provision is false and inaccurate.

Bill Singer's Comment

Online FINRA BrokerCheck records as of July 24, 2023, disclose that Johnson was first registered in 1994 and remained associated with various iterations of Swiss Bank Corporation/ SBC Warburg/Warburg Dillon Read through April 1999; and, thereafter, was registered from October 2004 to May 2019 with The Bank Street Group L.L.C, where she held the position of Managing Director.

Not Liable For Gender Discrimination but Liable for What?

The "Explaination of Decision" makes it clear that the arbitrators specifically found that "Respondents are not liable for gender discrimination or any of the other causes of action alleged related thereto." So . . . the $510,666 in compensatory damages is not compensation for gender discrimination. Okay, fine, but what the hell is it compensation for? Frankly, the explaination isn't much of an explanation, and, making matters worse, the explaination is more of an explanation as to what the award is NOT about. Oddly, the Award never actually states which of the 14 causes of action (as set out on page 2 of the FINRA Arbitration Award) were determined to be the basis for the arbitrators' finding of liability: 

1. breach of contract;
2. promissory estoppel;
3. fraudulent inducement;
4. fraud;
5. breach of the implied covenant of good faith and fair dealing;
6. conversion;
7. accounting;
8. unjust enrichment; 
9. failure to pay wages in violation of Connecticut General Statute § 31-71a, et seq. against Bank Street;
10. gender discrimination and retaliation;
11. failure to pay wages in violation of Connecticut General Statute § 31-71a, et seq.;
12. gender discrimination and retaliation;
13. defamation; and
14. expungement of Form U5.

I am not quite sure as to the difference between cause-of-action #10 and cause-of-action #12 -- perhaps that's a Freudian slip by the arbitrators? 

FINRA -- You got some 'splaining to do!

As I often ask: Does anyone at FINRA ever read what the organization publishes? What the hell is an "explaination," and how many more times must I note this misspelling before the regulator/arbitration forum corrects it? See, for example, "TD Ameritrade Customer Loses Incorrect Address FINRA Arbitration" (BrokeAndBroker.com Blog / October 24, 2022) 
https://www.brokeandbroker.com/6732/tdameritrade-incorrect-address/, in which I noted in passing that:

• FINRA
• Arbitration
• Gender Discrimination
• Oral Agreement
• Expungement
• U4
• Equity
• The Bank Street Group
• BrokeAndBroker
• Bill Singer