Broker Protocol Cited In Bonus Retention Lawsuit

April 13, 2016

The preamble to the "Broker Protocol" states the following:

The principal goal for the following protocol is to further the clients' interests of privacy and freedom of choice in connection with the movement of their Registered Representative ("RRs") between firms. If departing RRs and their new firm follow this protocol, neither the departing RR nor the firm that he or she joins would have any monetary or other liability to the firm that the RR left by reason of the RR taking the information identified below or the solicitation of the clients serviced by the RR at his or her prior firm, provided, however, that this protocol does not bar or otherwise affect the ability of the prior firm to bring an action against the new firm for "raiding." The signatories to this protocol agree to implement and adhere to it in good faith. 

READ the FULL-TEXT "Broker Protocol"

As with many efforts to reach any industry-wide consensus, the Broker Protocol often succeeds but also has its moments of failure. Similarly, while the goals of the member firm signatories are often met by the terms of the Protocol, the desires of the hundreds of thousands of subject men and women registered reps are not always satisfied. Pointedly, many chafe at the upfront admonition that the Protocol was designed to best serve clients privacy rights and freedom of choice. Critics would argue that the Protocol is merely another arrow in the quiver of management to be used against disgruntled labor. In essence, the bosses dictate the terms by which the employees can come and go. Whatever your allegiance and preferences, consider how the Protocol came into play in a recent industry arbitration.

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in November 2014, former Ameriprise Financial Services, Inc. employee Claimant Chapman asserted unfair trade practices and breach of the Broker Protocol. Claimant alleges that he was paid a bonus by Ameriprise Financial Services, Inc. but his former employer demanded repayment because he had allegedly violated the non-compete provision of the agreement under which the bonus was paid. Claimant apparently argued that he should not be required to repay the bonus because he departed from one Broker Protocol signatory to another, and he apparently asserted that he did so in compliance with the Protocol. Claimant sought unspecified damages, fees, and costs. In the Matter of the FINRA Arbitration Between John W. Chapman, Claimants, vs. Ameriprise Financial Services, Inc. and Ameriprise Financial, Inc., Respondent (FINRA Arbitration 14-0337114-03371, March 10, 2016).

Respondent Ameriprise Financial Services, Inc. generally denied the allegations and asserted various affirmative defenses.

Respondent Ameriprise Financial, Inc. did not submit a Statement of Answer or Submission
Agreement. In March 2015, FINRA notified Claimant that Ameriprise Financial, Inc., a non-member, did not submit to FINRA jurisdiction. Accordingly, the Panel did not adjudicate any claims against Respondent Ameriprise Financial, Inc.


The FINRA Arbitration Panel found Ameriprise Financial Services, Inc. liable to and ordered it to pay Claimant Chapman:
  • $117,666.45 in compensatory damages;
  • $5,833.25 in attorneys' fees; and
  • $250.00 in costs
Bill Singer's Comment

This FINRA Arbitration Decision titillates us with references to Claimant's use of the Broker Protocol as a defense for his right to retain a bonus, but the arbitrators never tell us what the actual facts in dispute were. About all we know is that there was an issue between Claimant and Ameriprise over something involving non-competition. Further, although this case sets up as one in which Claimant was looking to retain a paid bonus, we wind up with an award of just under $125,000 -- for what?  Your guess is as good as mind.