In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in April 2010, Claimant Hylton, representing herself pro se, alleged that Respondents wrongfully withheld commissions for July through October 2009. Claimant sought at least $6,000 in withheld commissions; $10,000 in punitive damages; plus interest, costs, and expenses. In the Matter of the FINRA Arbitration Between Beverly M. Hylton, Claimant/Counter-Respondent, v. Edward Wedbush and Wedbush Securities Inc., Respondents/Counter-Claimants (FINRA Arbitration 10-01823, October 3, 2011).

Respondents generally denied the allegations, asserted various affirmative defenses, and filed a Counterclaim that sought a $50,000 indemnification from Claimant for her alleged wrongdoing in a separate arbitration.

The FINRA Arbitrator denied Claimant Hylton’s claims and allowed Respondent Wedbush Securities to retain the $6,000 deduction from Claimant’s commissions. 

SIDE BAR:  According to online FINRA records, Claimant Hylton and Respondent Wedbush Securities were previously named in a FINRA customer arbitration filed in August 2008, in which Claimant Agee sought at least $190,000 in damages in connection with “investments of mortgage (CMOs) and subprime debt related securities (CDOs) as well as other investments, including but not limited to, Thornburg Mortgage, RMK Advantage Income Fund, and Annaly Mortgage Management.”

The FINRA Arbitration Panel found Respondent Wedbush Securities solely liable for $100,000 in damages, and Respondent Hylton solely liable for $10,000 in damages. In the Matter of the FINRA Arbitration Between Inna T. Agee, individually and as Owner and Beneficiary of the Irma T. Agee IRA, Claimant, v. Wedbush Morgan Securities, Inc. and Beverley M. Hylton, Respondents (FINRA Arbitration 08-02897, July 17, 2009).

Apparently, Respondent Wedbush Securities’ $50,000 Counterclaim in Hylton v. Wedbush et al. was premised upon the firm’s belief that Hylton was responsible for contributing 50% of the $100,000 award in Agee that was rendered solely against the firm.

Bill Singer’s Comment

I’m guessing that there’s more than a few drops of bad blood between Claimant Hylton and the Respondents.  I’m also going to give Hylton a bit of consideration here because she handled her own case.  Notwithstanding, there’s an interesting lesson to be learned from this matter. 

Former employee Hylton came after her former employer for about $6,000 in withheld commissions.  I’m sure that Hylton’s mind-set was that “I earned it. It’s mine. They have no right to ask me to contribute a penny towards their sole liability on the Agee Award.” 

On the other hand, sometimes you have to weigh the benefit to be gained — here, about $6,000 — versus the potential costs of launching an arbitration.  While some may have counseled Hylton that her downside in her arbitration against Wedbush was the loss of the $6,000 that her former employer was unwilling to release, that’s only part of the equation.  In reality, filing this arbitration opened the door for Wedbush’s claim for contribution on the $100,000 award rendered against it in Agee. 

Yes, it’s possible that on another day, another FINRA Arbitration Panel could have not only awarded to Hylton the $6,000 in commissions but also whopping punitive damages plus the full panoply of costs and expenses — however, given the specific facts and history in this case, I don’t think that the odds for such a favorable ruling were ever likely. 

Instead of letting a dead dog alone, Hylton resurrected the whole mess in Agee and on top of her having been found solely liable in that case for $10,000, she now gets tarred with the inference from the present matter that she may have been more at fault than the relatively paltry $10,000 award ordered against her suggests.  To some extent, up until her loss here, Hylton had some leeway to tell prospective employers and customers that Agee was a load of crap and she only got hit with a lousy $10,000 out of $110,000 awarded (and that was a discount from the $190,000 the complaining customer sought).  Now, Hylton not only has to explain Agee but also her loss against Wedbush.

Another Case In Point

In another Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in February 2011, Claimant Hart sought to recover damages for allegedly unpaid fees, unpaid commissions, and return of property. Claimant asked for an award of  $9,598.70 in compensatory damages plus punitive damages, attorneys’ fees, and costs associated with this arbitration.In the Matter of the FINRA Arbitration Between Fredric R. Hart, Claimant,vs. Nancy Frances Chinchar, Peter Daniel Grassel, and Sandgrain Securities, Inc., Respondents (FINRA Arbitration 11-00570, September 30, 2011).

Respondents generally denied the allegations and asserted various affirmative defenses.

The sole FINRA Arbitrator found Respondent Sandgrain Securities, Inc. liable and ordered the firm to to Claimant Hart $3,700 in compensatory damages. The claims against Respondents Chinchar and Grassel were dismissed.

Bill Singer’s Comment

In some sense, Hart is the mirror image of Hylton.  The former employee in Hart emerges largely unscathed and with $3,700 in his pocket — having launched a sanitized war with limited downside against his former firm, Hart comes out of his arbitration a clear victor. 

Before you pull the pin on the hand grenade of a FINRA intra-industry arbitration, make sure that you’re ready to throw the explosive before it blows up in your hands.  From my perspective, Claimant Hart managed to stand outside the blast zone; on the other hand, Hylton seems to have counted to four when she only had until three.