FINRA's Un-explained Arbitration Decision Awards Nearly $1 Million to Former TD Ameritrade Employee

September 8, 2011

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in November 2009, Claimant Monsefi sought to recover unspecified damages, unpaid wages, bonuses, interest, and other relief based upon allegations including breach of contract; interference with economic relations; Wages and Labor Code violations; fraud; and unfair business practices relating to the termination of his employment by Respondent TD Ameritrade. In the Matter of the FINRA Arbitration Between Amir Ali Monsefi, Claimant, vs. TD Ameritrade, Inc., Respondent (FINRA Arbitration 09-06492, September 6, 2011). 

Respondent TD Ameritrade generally denied the allegations and asserted various affirmative defenses.

On April 15, 2011, Claimant requested an Explained Decision  but because Respondent did not join in Claimant's request, the FINRA Arbitration Panel was not compelled to grant the application.

SIDE BAR: In 2009, FINRA amended its Customer Code and Industry Code to require arbitrators to provide an explained decision at the parties' joint request. In providing this option, FINRA acknowledged that the absence of explained decisions had become a flashpoint among critics of the self-regulatory organization's mandatory arbitrations.  The typical FINRA Arbitration Decision posed particular problems for losing parties seeking to appeal because courts reviewing such rulings often found little, if any, meaningful explanation or discussion by the arbitrators.

In the double-speak of regulators and politicians, FINRA explains that an:

explained decision is a fact-based award stating the general reasons for the arbitrators' decision. It does  not need to include legal authorities and/or damage calculations.

Okay, so, lemme see if I got this.  Folks complained about FINRA's terse arbitration decisions and the remedy was to implement an "Explained Decision," that is a "fact-based award" only required to state "the general reasons for the arbitrators' findings" and it doesn't have to explain how damages were calculated.  Geez, if that's an improvement can you imagine how meaningless FINRA's typical arbitration decisions are? 

Sadly, at the evidentiary hearing, the Panel denied Claimant's request for  an Explained Decision.  Why do I say "sadly" in connection with the Panel's denial of the Explained Decision?  For starters, consider this verbatim of determination by the Panel - and you tell me if you can figure out anything, and I mean anything, about the nature of the dispute in this matter, what proof was presented, or why the Panel ruled as it did (both in terms of its finding of liability and the precise calculation of the damages):

 1. Respondent is liable for and shall pay to Claimant compensatory damages and interest in the total amount of $773,750.00. 

2. Respondent is liable for and shall pay to Claimant attorneys' fees in the amount of $120,000.00 pursuant to the California Labor Code.

3. Respondent is liable for and shall pay to Claimant the sum of $200.00 as reimbursement for the Initial Claim filing fee previously paid by Claimant to FINRA. 

4. Any and all relief not specifically addressed herein, including punitive damages, is denied.

Bill Singer's Comment

For me this Decision is meaningless and constitutes a disservice to the industry and the investing public. 

  • Why did the Panel award Monsefi nearly a million bucks? Dunno.
  • What were the specifics of Claimant's complaints? Dunno
  • What were the specifics of Respondent's defenses? Dunno.
  • On what basis was the nearly of a million dollars in damages calculated and what does that number represent? Dunno.

The FINRA Arbitration Panel awarded something shy of $1 million in compensatory damages and attorneys' fees. By my standards, that's a fairly substantial award.  TD Ameritrade is a publicly traded company with shareholders who will be footing this bill.  Employees of FINRA member firms, such as TD Ameritrade, are mandated to pursue their grievances in FINRA arbitrations but learn nothing from this matter that could assist them with similar difficulties involving other member firms. 

The circumstances of many intra-industry disputes often raise issues that might be of a material interest to a potential customer; for example, are brokers at a given firm forced to push house product, did the firm engage in some form of discrimination that I might find particularly odious, are there financial or managerial problems at the firm that could put my account at risk, etc.

In light of the relatively high-stakes numbers involved in this intra-industry dispute that pitted a former employee against a fairly substantial FINRA member firm, I think the minimalist nature of this Decision fails the industry and the public.  The adjudication of Wall Street's disputes by FINRA arbitration panels should provide more information to the industry and the public than what is typcially gleaned from the final total on a cash register after your purchases are entered.