February 24, 2012
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in August 2011, Claimant Wells Fargo Advisors sought to recover $25,000 in training fees from Respondent Higley as a result of his alleged breach of his New Financial Advisor Training as a result of his alleged breach of his New Financial Advisor Training Agreement. In the Matter of the FINRA Arbitration Between Wells Fargo Advisors, LLC, Claimant, vs. Shawn Orin Higley, Respondent (FINRA Arbitration 11-03197, February 15, 2012).
Although Respondent Higley is indicated as having appeared pro se, there is no indication as to whether he denied the allegations or asserted any affirmative defenses.
The FINRA Arbitrator found Respondent Higley liable and ordered him to pay to Respondent Wells Fargo $25,000, although Claimant's request for attorneys' fees was denied. Respondent was further ordered to reimburse Claimant $525 for its FINRA filing fee. Finally, Respondent's request for an expungement was denied. One can only wonder how much of this outcome was determined by Respondent's lack of legal representation and his decision to represent himself (which may have been an economic necessity).
Bill Singer's Comment
What were the specific facts underlying this case? I have no idea as the Decision just didn't think it necessary to inform us. Why did the Arbitrator award $25,000? Dunno - again, no explanation is provided. Could Higley have been one of those cases where Wells Fargo was fully within its rights and Higley was in the wrong - you betcha but we'll never know. Given my rant against Trainee Fees, you'll pardon me if I don't launch into another of my patented tantrums about the unacceptable lack of information in most FINRA Arbitration Decisions
Not a particularly complex case. Fact is, these Trainee Fees disputes overwhelmingly settle before making their way to a hearing; however, this was an exception.
Why did I publish this matter? The answer is simple: I keep getting phone calls from young men and women asking for free advice - Do I have to repay these trainee fees. I was told that the former employer never wins and always takes like 5% to settle. I really don't have the bucks to pay upfront.
For the record, I hate, I detest, and I despise not only Trainee Fees but the very concept of a brokerage firm being able to recoup a portion of its cost in preparing trainees to become registered. It strikes me as having the same compelling rationale as McDonald's suing to recoup its Hamburger University training fees if a graduate of their program jumps ship for Wendy's or Burger King. Frankly, I'm almost positive that an individual seeking a career in restaurant management obtains far more of value from McDonald's Hamburger University than most Wall Street trainees obtain from their so-called in-house training. I trust my feelings on this subject are clear?
Admittedly, there may be appropriate circumstances of gross bad faith by the trainee in which reimbursement of the reasonable value of the training may be fair. In such circumstances, I would not be adverse to awarding the reasonable value of the training but rarely, if ever, the liquidated damages sought by the former employer. In most of these cases, the former brokerage employer is seeking to recoup Trainee Fees that exceed the cost of a year's worth of Ivy League college. And for what? Learning how to push house product? Learning how to overcome a customer's objections? And, puhlease, don't start with me - I used to have a Series 7 and a Series 63 and I'm a 30-year industry veteran. It's quite common for trainees to be "charged" $75,000 for this education. You really think that working for the likes of Merrill Lynch or Morgan Stanley Smith Barney should come with such a price tag? I know all too well what is taught during these training programs and the reasonable value of such a dubious education.
I publish Higley as a warning and the best evidence with which to refute the dangerous myth that no firm will go to the mat to collect Trainee Fees and that no FINRA Panel or Arbitrator will award all that is sought. Wells Fargo won this case, hands down. No question about it.
See, these recent "Street Sweeper" articles