Financial Services Employment Blog

 

By: Anshel Joel "AJ" Kaplan, Cameron Smith and Cliff Fonstein

May 16, 2017

Ask and You Shall Receive: New York City Contemplates Requiring All Employers to Consider Requests for Flexible Work Arrangements

Seyfarth Synopsis: New York City is considering proposed legislation that would require all employers to consider employee requests for flexible work arrangements, increase the administrative burdens on employers, and limit the grounds on which employers could deny certain requests.

Following its introduction in December 2016, the New York City Council’s Committee on Civil Service on Labor conducted a public hearing on March 3, 2017 regarding a proposed ordinance, Bill No. 1399, which would require all New York City employers to consider employee requests for flexible work arrangements.

Click here to read the full post.

      By: Kyle Petersen and Molly Mooney

May 10, 2017

Too Personal To Proceed: Personal Bankers' Certification Bid Bounced Again

Seyfarth Synopsis: The Second Circuit recently upheld a district court order denying a bid for class certification by personal bankers claiming their managers refused to approve timesheets with overtime hours, shaved reported overtime hours, and pressured them to work off the clock. Because the company’s policy governing (and limiting) overtime work was lawful on its face, the bankers’ claims hinged on the exercise of managerial discretion in applying those policies. The district court concluded that the plaintiffs failed to demonstrate sufficient uniformity in the exercise of managerial discretion, and the Second Circuit affirmed.

As noted earlier, the trial court’s decision reflects reluctance by some trial courts to certify nationwide class actions based on local or even regionalized evidence of rogue managers deviating from company policy. The Court of Appeals has now given its seal of approval to that approach.

Click here to read the full post.

By: Cameron Smith and Meredith-Anne Berger

May 8, 2017

Springing Into Action, SEC Pays Out $4.5 Million in Whistleblower Awards, While House Republicans Attempt to Limit the Whistleblower Program

Seyfarth Synopsis: In the span of two weeks, the Securities and Exchange Commission awarded a whistleblower nearly $4 million, and another over $500,000.  While these awards are nowhere near the largest that the SEC has made — some have exceeded $20 million — they demonstrate the SEC’s continued focus on providing financial incentives to whistleblowers.

On May 2, the Securities and Exchange Commission (“SEC”) released an Order, see Release No. 80571, granting an award of over $500,000.  The SEC’s Order issuing the award noted that “Claimant, a company insider, provided information to the Commission that instigated the Commission’s investigation into well-hidden and hard-to-detect violations of the securities laws.” 

Click here to read the full post.

By: Samuel Sverdlov, Cameron Smith and Stacey Blecher

May 3, 2017

FINRA Proposes Rule Changes to Expedite Arbitrator Selection

Seyfarth Synopsis: The Financial Industry Regulatory Authority ("FINRA") filed proposed rule changes with the Securities Exchange Commission ("SEC"). If approved, the revised rules would require that FINRA send arbitrator lists to the parties within 30 days after the last answer is originally due, regardless of the parties' agreement to extend any deadline to answer.

FINRA's Board of Directors has been trying to expedite and simplify FINRA arbitration for some time. By way of background, FINRA Rule 13303 requires a respondent to answer the statement of claim by the "answer date," which is within 45 days of receipt of the statement of claim. See also FINRA Rule 12303. If there are multiple respondents to an arbitration, and the respondents are added at different times, each respondent would have a different answer date.

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By: Meredith-Anne Berger and Eric Steinert

March 9, 2017

SEC Claws Back Award for Dawdling Whistleblower, as Feds Signal Changes in Award Eligibility

Seyfarth Synopsis: Last Week, the Securities and Exchange Commission released an Order Determining Whistleblower Award holding that the whistleblower's award should be reduced to 20% of the monetary sanctions collected in the covered action because the claimant was both involved in the illegal conduct and delayed in reporting the violations.

On February 28, 2017, the Securities and Exchange Commission (“SEC”) released an Order Determining Whistleblower Award Claim, Release No. 80115, which affirmed the Claims Review Staff’s Preliminary Determination that the claimant’s whistleblower award be reduced because of the claimant’s culpability in the securities violations and the claimant’s delay in reporting the award.  The SEC adopted the Preliminary Determination and reduced the whistleblower’s award to 20%.  This penalty is meant to encourage whistleblowers to promptly report violations and act in a manner that curtails, and does not further, the alleged illegal actions.

Click here to read the full post.

By: Robert Whitman and Samuel Sverdlov

March 2, 2017

Money Talks: NY DOL Adopts Regulations on Employee Discussion of Wages

Seyfarth Synopsis: New regulations from the NY Department of Labor clarify employers’ ability to limit employees’ discussion of wages.

The New York Department of Labor has promulgated regulations that permit employers to place “reasonable” limitations on employees’ discussion of their wages. The regulations, issued February 1, 2017, provide that such limitations are permissible if they are contained in a written policy and are “justified without reference to the content of the regulated speech, narrowly tailored to serve a significant interest, and leave open ample alternative channels for the communication of information.

Click here to read the full post.

By: Loren Gesinsky and Meredith-Anne Berger

October 17, 2016

FINRA Brushes Back Courts and Others Crowding Its Home Plate for Exclusive Dispute Resolution

Recently, FINRA published Regulatory Notice 16-25, avowing its staying power as the exclusive forum for the resolution of employment and other business-related disputes between members and associated persons. Despite efforts by a growing number of parties to contract away from the FINRA forum (for reasons such as those summarized here), with the support of certain courts, FINRA has doubled down on its position that any agreement signed by an employee waiving his or her right to arbitration through FINRA is unenforceable.   

Click here to read the full post.

By: Cameron Smith, Cliff Fonstein, and Anshel Joel "AJ" Kaplan

August 17, 2016

SEC Targets Employment Agreements Requiring Waiver of Whistleblower Awards

The SEC’s Office of the Whistleblower continues to examine employee severance, settlement and confidentiality agreements for language that might chill reporting of securities violations to the SEC and other regulators. The SEC announced on August 10, 2016 that BlueLinx Holdings, a building products distributor, will pay $265,000 to settle charges that its severance agreement violates Rule 21F-17 by requiring departing employees to forego whistleblower bounty awards and using confidentiality language that restricts reporting of possible securities law violations. The Order is available here.   

Click here to read the full post

By: Cameron Smith and Cliff Fonstein

August 8, 2016

FINRA Award Numbers Show Declining Employee Win and Recovery Rates

Seyfarth Synopsis: The Securities Arbitration Commentator (“SAC”) recently published its 2015 award analysis survey. Since the last survey in 2013, there has been a slight increase in the number of employment arbitrations resulting in awards, but a notable decrease in win and recovery rates by employees against member firms.

The SAC’s 2015 survey examines securities industry arbitration awards (mostly FINRA awards) issued in 2015 and analyzes them in the context of awards from a 7-year period (2009 through 2015). While the majority of awards issued each year are for customer cases, and a good deal of the SAC analysis concerns customer cases, SAC has broken out numbers for employment cases. Unlike the caseload for customer cases, which roughly follows the ups and downs of the economic cycle, the number of employee claims proceeding to award has increased slightly. In 2015, for example, employees arbitrated 173 employment claims to award against their employers. While this was a decrease from 202 cases the previous year, both 2014 and 2015 exceed the average of 162 cases a year from 2009 to 2015, and the average of 156 cases per year from 2007 through 2013. The SAC speculates that the peak of 202 cases in 2014 may be explained, at least in part, by the steady increase of “independent” expungement claims by brokers to remove customer complaints from their records, which comprised 54 employee-initiated cases against member firms in 2014.

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By: Caitlyn Crisp

July 22, 2016

Senior Financial Advisor “Terminated Without Just Cause” Awarded $985,000 by FINRA Arbitration Panel

Elizabeth Dale Stancil was a top performing senior financial advisor and 13-year employee of First Citizens Investor Services, a subsidiary of First Citizens Bank, in Smithfield, North Carolina.  She generated over $1 million in revenue and managed over $120 million in assets for 1,100 customers.  She was terminated in March of 2014 for making unauthorized bonus payments to her two sales assistants totaling $9,000 by personal check or cash.

Click here to read the full post.

By: Cliff Fonstein and Meredith-Anne Berger

July 14, 2016

No Double Dipping: Court Rejects Lehman Traders’ Claims for Additional Comp

On July 6, 2016, Judge Schofield of the Southern District of New York, on appeal from the Bankruptcy Court, rejected the claims of two former proprietary traders at Lehman Brothers that they were entitled to additional money for their 2008 bonuses.  In denying the traders’ claims, Judge Schofield scrupulously stuck to the language and intent of the traders’ compensation agreements.

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By: Cliff Fonstein and Meredith-Anne Berger

June 15, 2016

SEC Issues Near Record-Breaking Whistleblower Award

On June 9, 2016, the Securities and Exchange Commission announced it awarded over $17 million to an ex-employee of a financial services firm.  The SEC’s press release touts the award as the second-highest bounty ever handed to a whistleblower, bested only by a $30 million award from September 2014.  This recent award brings the grand total of whistleblower awards to over $85 million since the bounty program began in 2011 and adds to the already substantial sum of $2.5 million awarded since January 2016.

Click here to read the full post.

By: Cliff Fonstein and Meredith-Anne Berger

May 27, 2016

Federal Reserve Bank Ruled a Federal Supervisory Agency Under the BSA

In a case of first impression, a district court held that a regional Federal Reserve Bank was a supervisory agent as defined by the Bank Secrecy Act (“BSA”).  The BSA requires the reporting of any suspicious activity that may constitute a violation of tax, anti-money laundering, and other laws and contains expansive whistleblower protections.  The law prohibits discrimination or retaliation against employees that provide information to the “Secretary of the Treasury, the Attorney General, or any Federal Supervisory agency regarding a possible violation” of the BSA.

Click here to read the full post.
 

By: Robert S. Whitman, Cameron A. Smith, and Samuel Sverdlov

May 20, 2016

FINRA Board of Governors Authorizes Rule Changes

Seyfarth Synopsis:  Following FINRA’s May 2016 board meeting, its Board of Governors authorized filing with the SEC proposed amendments to several FINRA arbitration-related rules. The Board has proposed amendments to rules regarding gifts and non-cash compensation, chairperson eligibility, and motions to dismiss.

As we previously wrote about here, in June 2015, FINRA’s Arbitration Task Force, a group of 13 industry experts, issued a host of recommendations intended to improve the transparency, impartiality and efficiency of FINRA arbitrations. The Task Force report, entitled Interim Summary of Key Issues, did not propose specific rule changes to the Code of Arbitration Procedure. Rather, it made broad-based policy suggestions that, if ultimately adopted by the Board and incorporated into rule amendments, would have a significant effect on FINRA arbitrations.

Click here to read the full post.
 

By: Cliff Fonstein and Meredith-Anne Berger
March 15, 2016

Financial Industry in the Hot Seat with Democrats’ Proposed Bill Expanding Whistleblower Protections

Senator Tammy Baldwin (D-Wis.) and Representative Elijah Cummings (D-Md.) have co-sponsored a bill that streamlines and reinforces current whistleblower laws that affect Financial Service industry employers.  In case there is any doubt that Wall Street has a target on its back, the press release announcing the new law stated: “The middle class has paid a steep price for the irresponsible actions of others, yet only one top banker went to jail for the financial crisis.  If we strengthen and empower whistleblowers in the financial industry, we can do a better job of holding Wall Street accountable.  These reforms will help us do that.”

Click here to read the full post.
 
 

By: Robert S. Whitman, Cameron A. Smith, and Samuel Sverdlov
January 25, 2016

FINRA Arbitration Task Force Issues Final Report Recommending Major Changes

On December 16, 2015, the Financial Industry Regulatory Authority (FINRA) Dispute Resolution Task Force, a 13-member group representing a broad range of securities industry professionals, issued its Final Report (available here).  As previewed in its July 2014 interim report (see here), the Task Force has recommended 51 changes to FINRA’s dispute resolution program.  The proposals will be presented to FINRA’s National Arbitration and Mediation Committee (NAMC) for further review.

Click here to read the full post.
 


By: Robert S. Whitman, Cameron A. Smith, and Samuel Sverdlov
October 22, 2015

FINRA Arbitration Task Force Issues Recommendations on Key Issues

FINRA’s Arbitration Task Force, a group of 13 industry experts convened in July 2014, has issued a host of recommendations intended to improve the transparency, impartiality and efficiency of FINRA arbitration.  The Task Force report, entitled Interim Summary of Key Issues, does not propose specific rule changes to the Code of Arbitration Procedure.  But it makes broad-based policy suggestions that, if ultimately adopted by the FINRA Board of Governors and incorporated into rule amendments, would have a significant effect on the conduct and scope of FINRA arbitrations.

Click here to read the full post.
 


By: Robert S. Whitman, Cameron A. Smith, and Jade M. Wallace
July 6, 2015

Second Circuit Upholds Class Action Waivers in FINRA Arbitration

The FINRA Code of Arbitration Procedure, which generally precludes FINRA from administering arbitrations of class or collective claims, does not prevent industry member firms from enforcing pre-dispute class and collective action waivers against their employees, according to a new ruling from the Second Circuit.

The Plaintiff in Cohen v. UBS Fin. Servs., Inc., was a financial advisor who agreed to a compensation plan that included an arbitration clause, which mandated arbitration of any claim under FINRA rules and waived “any right to commence, be a party to or an actual or putative class member of any class or collective action arising out of or relating to [Cohen’s] employment with UBS.”

Click here to read the full post.
 
 

By: Cameron A. Smith and Ephraim J. Pierre
June 16, 2015

Federal Agencies Issue Final Diversity & Inclusion Standards Under Dodd-Frank

Under new guidelines issued by six federal agencies, financial firms are being asked to voluntarily publicize sensitive diversity and inclusion information such as company policies, strategic planning, senior management participation in diversity initiatives, and workforce and procurement metrics.

On June 10, 2015, pursuant to Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), the six federal regulatory agencies under Dodd Frank1 jointly issued a final interagency policy statement (“Policy Statement”) establishing shared standards for assessing the diversity policies and practices of their regulated entities.2 Dodd-Frank’s Section 342, among other things, required that these six agencies establish Offices of Minority and Women Inclusion (“OMWI”) to report on agency diversity efforts and develop standards for assessing the diversity policies and practices of the firms they regulate.  The Policy Statement affects companies regulated by one of the six agencies and encourages firms to voluntarily disclose a self-assessment of their diversity and inclusion policies and practices to their regulators and the public at large on an annual basis.

Click here to read the full post.
 
 

By: Robert Whitman and Cameron A. Smith
March 17, 2015

SEC Approves FINRA Rule Change Limiting Public Arbitrator Roster

The SEC has approved FINRA’s latest arbitrator classification rule change to amend the “non-public” and “public” arbitrator definitions in the Industry and Customer Codes of Arbitration.  

FINRA’s rule change will permanently prohibit all persons who are now or have ever been affiliated with any financial industry entity from serving as public arbitrators.  FINRA will also prohibit individuals who have represented financial services companies, such as lawyers or accountants, from serving as public arbitrators until expiration of expanded cooling-off periods.
 
Click here to read the full post.
 
 

By: Eric M. Steinert and Cameron A. Smith
January 27, 2015

The Unique Role of Expert Witnesses in FINRA Employment Arbitrations, Part II

To further explore the issues raised in Part I, we have added a short interview with the well-regarded securities-industry expert Jay Rosen, Chairman and Founder of Capital Forensics, Inc.  In response to our questions, Mr. Rosen provides some valuable perspective drawn from his over 35 years of experience in the securities industry.  Mr. Rosen provides analysis and expert testimony in the areas of suitability, supervision, compliance, fiduciary duty, money management, investment advisory, branch management, employment disputes, surveillance, anti-money laundering projects, regulatory investigations, and ERISA-related matters, as well as transactional analysis.  He has been retained as an expert in over 350 litigation proceedings.

Click here to read the full post.

By: Eric M. Steinert and Cameron A. Smith
January 14, 2015

The Unique Role of Expert Witnesses in FINRA Employment Arbitrations, Part 1

Despite the prevalence of expert witnesses in FINRA employment arbitrations, FINRA’s arbitration rules are virtually silent on the topic.  In contrast, expert witnesses in civil litigation are the subject of detailed statutes, procedural rules, and well-developed case law regarding their disclosure, discovery, reports, and the admissibility of their testimony.

This article explores the unique role of experts in FINRA employment arbitration and concludes with a brief Q&A with an experienced securities-industry expert, Jay Rosen.

Click here to read the full post.

By: Cameron A. Smith and Robert S. Whitman
October 16, 2014

FINRA Gives Whistleblowers an Assist

Concerned that whistleblowers may not find their way to its door, FINRA recently advised member firms that they may be disciplined for using arbitration settlement agreements that do not expressly authorize an individual to inform FINRA or other regulators about potential securities law violations.

Click here to read the full post.



By: Cliff Fonstein
August 8, 2014

FINRA Award Numbers: Good News For Employers

The Securities Arbitration Commentator (“SAC”) recently published its 2013 award survey. The numbers in employment cases present good news for employers.

The survey examines securities industry arbitration awards (mostly FINRA awards) that were issued in 2013 and analyzes them in the context of awards issued over a 7-year period (from 2007 through 2013).  While the majority of the awards issued each year are for customer cases and a good deal of the SAC analysis concerns customer cases, SAC has broken out numbers for employment cases.  Unlike the case load for customer cases, which roughly follows the ups and downs of the economic cycle, the number of employee claims going to award has been roughly constant over the 7-year period.  In 2013, for example, 160 employment claims were arbitrated to award by employees against their employers.  While this was an increase from 136 the previous year, it is consistent with the average of 156 cases a year from 2007 through 2013.
 
Click here to read the full post.


 

By: Cameron A. Smith
May 8, 2014

A Mini “Franken”-Stein?  New York Assembly May Clamp Down on Employment Arbitration  

Inspired by the so-called “Franken Amendment,” which prohibits federal defense contractors with contracts in excess of $1 million from requiring arbitration of their employees’ claims for discrimination or harassment, the New York State Assembly recently passed a bill that would impose the same prohibition on State contractors.

Click here to read the full post.


 

By: Eric M. Steinert and Emily E. Barker
February 14, 2014

Understanding FINRA Panel Composition   

Not all FINRA panels are alike. Some cases will be heard before a single arbitrator, others before a panel of three. The nature of the panel’s composition may differ as well: some panels may have solely public arbitrators, while others may have a mix of public and industry arbitrators, as well as other special qualifications.

Understanding the basic rules around panel composition is critical to successfully litigating FINRA employment arbitrations. Here are some of the factors determining FINRA panel composition. Click here to read the full post.

Click here to read the full post.

By: Eric M. Steinert and Matthew Gagnon
February 6, 2014

Compelling FINRA Arbitration for Dodd-Frank Whistleblowers  

Financial-services employers typically struggle to keep whistleblower claims within the confines of FINRA arbitration. FINRA Rule 13201 carves out a broad swath of whistleblower claims from arbitration, namely (a) claims under whistleblower statutes that prohibit arbitration (such as the Sarbanes-Oxley Act ("SOX")), and (b) statutory employment discrimination claims (which has been construed in some occasions to exclude statutory retaliation claims). But a recent case from the Southern District of New York provides a ray of hope for financial-services employers facing Dodd-Frank whistleblower claims.

On January 27, 2014, the Southern District of New York handed financial-services employers a major victory in the fight to contain the growing trend of Dodd-Frank whistleblower litigation. In Murray v. UBS Securities, LLC, No. 2:12-cv-05914-KPF (S.D.N.Y. Jan. 27, 2014), the Court forced plaintiff’s whistleblower claims into FINRA arbitration, holding that his dispute did not "arise under" SOX, even though he alleged that his whistleblowing activity was required by that statute. Because plaintiff chose to file his claim directly in federal District Court under Dodd-Frank, rather than through the Department of Labor under SOX, he could not take advantage of the anti-arbitration provision applicable to SOX whistleblower claims.

Click here to read the full post.


By: Robert S. Whitman
January 16, 2014

Appellate Arbitration: Too Much of a Good Thing?

Employment arbitration has its advocates and detractors. Some view it as a speedy, efficient and less expensive alternative to the sinkhole of court litigation. Others say that arbitration is a false panacea, in which employers forfeit meritorious jurisdictional defenses and are forced to go to "trial" in nearly every case.

Regardless of where one falls on that spectrum of views, one area of agreement is that arbitration presents extremely limited opportunities for judicial review of awards, regardless of how "good, bad or ugly" the award was (to use Justice Elena Kagan’s memorable recent articulation).

Several prominent arbitration providers have stepped into the void, offering parties the option of "appellate arbitration" in addition to the more common "trial level" proceedings. In effect, these procedures allow the parties to "double down" on arbitration, using the private dispute-resolution system not only to find the facts and decide the law, but also to provide a backstop of additional review to correct errors. 

Click here to read the full post.

 


By: Robert S. Whitman
January 9, 2014

Motions to Vacate: Are They Worth the Trouble Anymore?

It’s an understandable reaction after an unwelcome verdict: “Onward and upward. We’ll be vindicated on appeal.” In arbitration, of course, things are not so simple.

In considering the pros and cons of arbitration compared to litigation, one factor that’s always mentioned is the limited basis for appeal of adverse awards. Whether that’s a “pro” or a “con” probably depends on whether you won or lost your last case. But one thing is certain: the grounds for vacating arbitration awards have become more precarious in recent years.
 

Click here to read the full post.


By: Cliff Fonstein
December 5, 2013

Choosing A Forum: FINRA vs. JAMS vs. AAA 

Sometimes an employer has the opportunity to choose which forum to use when arbitrating an employment claim: the American Arbitration Association (“AAA”), JAMS, or the Financial Industry Regulatory Authority (“FINRA”).  Remember, for example, in Credit Suisse v. Pitofsky, 4 N.Y 3d 149 (2005), the New York Court of Appeals held that an employer can draft an arbitration agreement that supersedes any obligation to litigate employment claims before a FINRA panel.  If you have the luxury of choosing a forum, or are creating an arbitration protocol for your company, there are several considerations you should examine before deciding which forum is the best for you.  We look at some of those considerations in this post. 

Click here to read the full post.
 

By: Cliff Fonstein
November 14, 2013

Should You Transfer a FINRA Arbitration to New York City? 

Often, you may have the luxury of choosing where you want to try a FINRA arbitration, in New York City (where many financial institutions are headquarted) or at another FINRA location.  Consider the example we recently had where the claimant was a New York City employee who was transferred to Baltimore, but whose employment claims mostly (but not completely) concerned events taking place in New York City.  The claim was initially filed in Baltimore, where the employee lives, and was assigned to FINRA’s Baltimore office.  In these or similar circumstances, what factors should you consider in deciding whether to try to move the case to New York City?

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By: Jeffrey A. Wortman and Candace S. Bertoldi
November 7, 2013

What Procedures and Standards Apply to an Expungement Claim in an Employment Dispute that Does Not Involve a Customer Complaint?

FINRA Rule 2080 provides clear procedural rules and guidelines when associated persons seek to expunge customer complaints from their Form U4 and Central Registration Depository (“CRD”) profile.  Rule 2080, however, does not apply to information concerning employment termination decisions not involving a customer complaint that are typically reported on the Form U5.

While no formal FINRA process exists in this area, a series of public notices and commentaries issued over the years shed some light on what standard and rules apply.  In essence, the process looks very similar to that laid out in Rule 2080.

Click here to read the full post.
 

By: Eric M. Steinert
October 31, 2013

Does My Case Qualify For Simplified Arbitration?

Occasionally, relatively small employment disputes arise regarding contractual compensation that are difficult to litigate cost effectively. In these cases, the amount at issue would be less than the fees and costs of taking the case through a full-blown evidentiary hearing.

For disputes where the amount in dispute involves $50,000 or less, FINRA offers "simplified arbitration" under Rule 13800. Simplified arbitration cases are also called "paper" or "small claims" cases. This is available for cases filed on or after April 16, 2007.  

Click here to read the full post.
 

By: Nicholas De Baun
October 24, 2013

What Do We Do If an Employee Sues Us in FINRA and in Court at the Same Time?

Absent an agreement to the contrary, FINRA won’t hear statutory discrimination or harassment claims, among others.  Instead, those claims must be litigated in court.  Occasionally, a shrewd employee will file parallel proceedings in FINRA and in court.  For example, an employee may file a FINRA arbitration claiming that the employer breached her employment contract when it failed to pay her a year-end bonus, and simultaneously file a federal lawsuit claiming that the failure to pay the bonus was also based on gender discrimination or retaliation for asserting her rights.  

 Click here to read the full post. 
 

 

By: Nicholas De Baun
October 17, 2013

A Rock And A Hard Place:  How Do I Handle Simultaneous Arbitration and Regulatory Inquiry?

A particularly thorny issue is presented when you are defending an arbitration and your regulator (FINRA, or perhaps the SEC) launches an inquiry into the very same facts that led to the dispute.  Suppose for example that you fire a financial advisor for serious repeated compliance violations.  Based on your statements on the employee’s U-5, FINRA launches an inquiry into the alleged violations.  At the same time, the broker sues you for wrongful termination, expungement of the U-5, and his unpaid bonus.

This scenario presents the obvious (and ugly) problem that you now have disclosure underway on two tracks.  On one track, your broker is demanding documents relating to his termination and supporting your U-5 statements.  On the other track, your regulator is demanding documents relating to the alleged compliance issue - a substantially overlapping set of documents.  The problem is compounded if your regulator compels you to produce a far broader set of documents than your broker or the arbitrators would compel you to disclose.  It is further exacerbated if your regulator is pursuing a failure-to-supervise line of investigation that requires you to assemble documents that could be very damaging to your prospects in the arbitration.

A good plaintiff’s lawyer who is aware of the likelihood of a regulatory inquiry and the problems such an inquiry can pose to you will demand production of all documents and information you have produced in response to any related regulatory inquiry.  These documents, if disclosed, can not only damage your case but could also adversely affect the regulatory inquiry.  What to do?

Click here to read the full post.
 


By: Nicholas De Baun
October 3, 2013

How Do I Get a TRO Against a Former Employee If Arbitration in FINRA Is Mandatory?

Occasionally, you may need emergency relief against a former employee who has absconded with a client list, your confidential information, and the clients themselves.  If you are very unlucky, you may need to get a TRO against his new employer as well.  If you, the former employee, and the new employer are all required to arbitrate any claims before FINRA, how do you get your TRO?

Click here to read the full post.

  


By: Robert S. Whitman
September 26, 2013

 Staying in Court on an Arbitrable Claim: Against FINRA Rules? 

The scenario is not uncommon:  a Registered Representative sues a FINRA Member Firm in court, asserting claims arising out of his employment and well within the scope of his U-4 obligation to arbitrate.  Under longstanding case law, the Member Firm has grounds to bring a motion to compel arbitration that will almost certainly be granted.

But what if the Member Firm would rather stay in court?  Let’s say the complaint asserts claims that would be vulnerable to a motion to dismiss on the merits.  This would enable the Firm to (hopefully) get rid of the case early, without the expense of discovery and hearings.  In a FINRA arbitration, where pre-hearing dispositive motions are largely disallowed, the case will have to go nearly “all the way” before dismissal is an option.

Is the Member Firm violating any obligation under FINRA’s rules if it decides to stay in court rather than invoke the U-4 and compel arbitration?

Click here to read the full post.