Arbitration panels of The Financial Industry Regulatory Authority, Inc. (“FINRA”) decide the vast majority of Wall Street employment-related disputes. At the Law Offices of David S. Rich, LLC, we have substantial experience representing employees in the securities industry in employment-related arbitration proceedings against brokerage firms before FINRA. Among the types of claims which we prosecute and defend, on behalf of individuals, in FINRA arbitrations are the following.
Wrongful Termination Claims
In the securities industry, as elsewhere in New York State, an employer (that is, a brokerage firm) may not fire a worker for a reason prohibited by an employment agreement, by statute, or by public policy.
An example of a reason for termination prohibited by statute is a public company's firing, demotion, suspension, threatening of, or harassment of an employee because the employee reported, to the federal government or to a supervisor, fraud against shareholders or a violation of Securities and Exchange Commission rules. Such retaliatory actions by a public company violate the Sarbanes-Oxley Act.
An example of a reason for termination prohibited by public policy is the discharge of a broker without cause based upon an implied-in-fact contract arising from promises contained in an employee handbook, provided that the broker detrimentally relied on the promises.
If you are an employee in the securities industry and you believe you have been wrongfully terminated, contact the Law Offices of David S. Rich, LLC.
So as to ensure that the time, work, and resources they invest in the training and development of new brokers will pay off, many large brokerage firms make new brokers sign employment agreements which include restrictive covenants.
There are two common categories of restrictive covenants in the securities industry. Non-disclosure agreements prohibit brokers from disseminating trade secrets or confidential information. Non-solicitation agreements bar brokers from seeking business from former customers for a specified length of time and within a defined geographical area.
In New York, restrictive covenants are enforceable to the extent that they are reasonable. A covenant is reasonable only if it (1) is no greater than is required for the legitimate interest of the brokerage firm, (2) does not impose undue hardship on the broker, and (3) is not injurious to the public.
If you are an employee in the securities industry, and your former employer seeks to enforce a restrictive covenant against you, contact the Law Offices of David S. Rich, LLC.
Promissory Note Cases
A type of dispute often arbitrated before FINRA between brokerage firms and brokers concerns “transitional compensation” payments to brokers whom the firms have fired within a predetermined period of time. Such disputes are called promissory note, up-front bonus, recruiting bonus, or forgivable loan cases.
In the securities industry, brokerage firms frequently offer account executives transitional compensation to ease the account executives’ lateral moves to those firms. A firm intends such compensation both to persuade the account executive to join the firm and to ensure that the executive won’t receive a windfall if he leaves the new firm soon after arriving. Thus, the up-front bonus or forgivable loan provision of a broker’s employment agreement usually provides that if the firm terminates the broker’s employment within a specified period for any reason, or if the broker elects to the leave the firm, the balance outstanding on the loan immediately becomes payable to the firm.
If the terminated broker does not immediately repay the loan, the firm may decide to bring a FINRA arbitration against the broker to collect the amount due.
The Law Offices of David S. Rich, LLC skillfully negotiates, on behalf of brokers, with firms which seek to collect on promissory notes. If an agreement cannot be reached, the Law Offices of David S. Rich, LLC is readily able to aggressively defend the brokers in promissory note arbitrations before FINRA.
Indemnification and Contribution of Customer Claims
A brokerage firm should not bring or maintain a claim against its employee for customer losses if the firm, by its own actions, has contributed to the loss.
Nonetheless, if you are a securities industry professional, your brokerage firm may seek to blame you for the firm’s improper actions, for actions which the firm knew about and authorized, or for the firm’s own failure to supervise a customer’s account. Likewise, your brokerage firm may seek to scapegoat you for a customer’s loss which, in fact, the brokerage firm caused by advising or urging the customer to purchase unsuitable securities.
If you are a broker, your brokerage firm may bring such accusations against you in a FINRA arbitration prompted by damages awarded to or monetary settlements paid to your customer. In such an arbitration, your brokerage firm may seek to make you contribute to, or indemnify the firm for, any monies awarded to, or any settlement paid to, your customer.
If your brokerage firm charges you with improper or unlawful conduct, the Law Offices of David S. Rich, LLC can adeptly negotiate with the firm on your behalf. If the dispute cannot be resolved, the Law Offices of David S. Rich, LLC is fully able to vigorously defend you against your former firm in a FINRA arbitration.
Form U-5 Expungements
Form U-5 (Uniform Termination Notice for Securities Industry Registration) is a form which brokerage firms must complete and file with securities regulators to report the termination of a broker’s employment. On the Form U-5, the brokerage firm must report the reason for the broker’s termination, and whether the broker voluntarily left, was permitted to resign, or was fired.
If a brokerage firm is seeking to retaliate against a broker, the firm may include defamatory information on the Form U-5 that damages the broker’s good name and severely harms the broker’s ability to find new employment.
The Law Offices of David S. Rich, LLC arbitrates, on behalf of brokers, FINRA proceedings seeking to expunge negative statements made on the brokers’ Form U-5s. If you are a securities industry professional with negative information on your Form U-5 which you need expunged, contact the Law Offices of David S. Rich, LLC.
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