February 1, 2018
In today's BrokeAndBroker.com Blog we have the interesting scenario in which a disgruntled, former Ameriprise employee sues her former employer for over a million bucks. About a month later, the former employer returns the favor and sues its former employee for six figures. Underlying both lawsuits is an employee forgivable loan, and allegations of defamation and breach of contract. By the time these disputes arrive before a FINRA Arbitration Panel, there ain't much love lost between the parties. It all seems fairly cut and dry. And then our publisher Bill Singer had to go online and started poking around. On the one hand. On the other hand. Maybe. Maybe not. See how you feel about everything when you get to the end of today's blog.
Case In Point: The Former Employee as Claimant
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2016, Claimant Brady asserted defamation, wrongful termination, breach of contract, tortious interference, and failure to supervise against Respondents Ameriprise and Noyes. At the close of the hearing, Claimant sought:
a. compensatory damages in the amount of $953,849.00 for lost back pay, front pay, and Sunset Plan pay;
b. compensatory damages in the amount of $1,000,000.00 for defamation and emotional injury;
c. expert witness fees in the amount of $11,550.00;
d. attorneys' fees in the amount of $210,900.00 for this arbitration and during the FINRA enforcement investigation;
e. all costs of this arbitration;
f. an Order that Ameriprise Financial unfreeze her personal and trust accounts;
g. an award of double damages equal to the amount of lost back pay, front pay and Sunset Plan pay of $953,849.00;
h. pre-judgement interest on the award, excluding double or punitive damages, in the amount of 12% per annum, or 1% per month beginning on September 7, 2016 to the date of this judgment, added to the award under Massachusetts G.L. Chapter 231, Section 6C;
i. post award interest starting 30 days from the date of the award until paid at the rate of 12% per annum under Massachusetts G.L. Chapter 231, Section 6C; and
j. dismissal of Ameriprise Financial's claim in its entirety. $551,313.00 in compensatory damages for allegedly lost earnings over three years plus interest and fees and costs.
In her Statement of Claim, Claimant sought an Order from the Panel that she is not responsible for repayment of any outstanding balances on employee forgivable loans ("EFL"). Further, Claimant sought an expungement of the allegedly defamatory "Reason for Termination" from her Form U5. It is unclear whether such relief was still on the table notwithstanding the above recitation as of the close of the hearing. In the Matter of the FINRA Arbitration Between Cheryle Anne Brady, Claimant, vs. Ameriprise Financial Services, Inc. and Brian Joseph Noyes, Respondents (FINRA Arbitration Master Consolidated Case Number 16-03134, January 23, 2018).
Case In Point: The Former Employee as Respondent
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in November 2016, Claimant Ameriprise asserted breach of promissory note agreement against Respondent Brady. Claimant Ameriprise sought:
a. $137,718.83, the principal owed as of September 7, 2016;
b. attorneys' fees, including costs, filing fees, forum fees, and hearing deposits;
c. an award for $25,019.57, the balance of the February 18, 2015 Note, plus interest, attorneys' fees, and costs;
d. an award for $28,517.33, the balance of the February 17, 2016 Note, plus interest, attorneys' fees, and costs;
e. pre-award interest in the additional amount of 1.42%, 1.26%, 2.21%, 1.94%, and 2.06% per annum on the outstanding balance, equaling $6.7687 per day until FINRA award;
f. post-award interest starting 30 days from date of award until paid at the maximum rate allowable by law;
g. permanent injunctive relief in the form of an order directing Respondent to make a legally enforceable request to any new or subsequent employer to disgorge any bonuses to Ameriprise Financial in order to repay all amounts owed to Ameriprise Financial by Respondent; and
h. such other and further relief as the Panel deems just and appropriate.
In the Matter of the FINRA Arbitration Between Ameriprise Financial Services, Inc.,Claimant, vs. Cheryle Anne Brady, Respondent (FINRA Arbitration Subordinate Case Number 16-03368, January 23, 2018).
All Respondents generally denied the allegations and asserted various affirmative defenses.
There is a reference to Case 16-03368 in which we are informed that Respondent Brady has submitted both a a Statement of Answer and Counterclaim.
In December 2016, Brady moved to consolidate the two cases, which Ameriprise opposed. In March 2017, the FINRA Arbitration consolidated the two matters. Accordingly, the caption of the Decision references 16-03368 case as a "Subordinate Case," and 16-03134 as the "Master Consolidated Case."
The FINRA Arbitration Panel found Respondent Ameriprise liable to and ordered it to pay to Claimant Brady:
- $675,000.93 in compensatory damages;
- $80,000.00 in costs; and
- $123,712.00 in attorneys' fees
Additionally, the Panel assessed all $17,900 in hearing session fees solely against Respondent Ameriprise.
The FINRA Arbitration Panel denied Claimant Brady's claim against Respondent Noyes and also denied Ameriprise's claim against Brady.
Is this a FULL TERMINATION?
Note: A "Yes" response will terminate ALL registrations with all SROs and all jurisdictions.
Discharged Other Permitted to Resign Deceased Voluntary
If the Reason for Termination entered above is Permitted to Resign, Discharged or Other, provide an explanation below:
If amending the Reason for Termination and/or termination explanation, provide an explanation below:
. . .
Internal Review Disclosure
7B. Currently is, or at termination was, the individual under internal review for fraud or wrongful taking of property, or violating investment-related statutes, regulations, rules or industry standards of conduct?
. . .
7F. Did the individual voluntarily resign from your firm, or was the individual discharged or permitted to resign from your firm, after allegations were made that accused the individual of:
1. violating investment-related statutes, regulations, rules or industry standards of conduct?
2. fraud or the wrongful taking of property?
3. failure to supervise in connection with investment-related statutes, regulations, rules or industry standards of conduct?
Having found the statements on Brady's Form U5 to be defamatory, the FINRA Arbitration Panel recommend that the Form U5 "Reason for Termination" should be changed to "Other" and that the "YES" answers to Form U5 Questions 7B and 7F(1) be expunged and revised to "NO." Finally, the Panel recommended that the Form U5 "Termination Explanation" should be revised to state:
TERMINATION WITHOUT CAUSE. THERE IS NO CREDIBLE PROOF THAT MS. BRADY AUTHORIZED THE ALLEGED TRADES OR THAT SHE WAS INVOLVED IN THE ALLEGED PRACTICE FOR WHICH SHE WAS TERMINATED. MS. BRADY'S FIRING WAS PRETEXTUAL, AS THERE WAS NO HARM TO ANY CUSTOMERS AND NO CUSTOMER COMPLAINTS. THE TRADES WERE ALLOWED TO STAND AND BENEFITED AMERIPRISE FINANCIAL SERVICES, INC. AND ITS CUSTOMERS.
First off, compliments to this panel of arbitrators for a thoughtful presentation of a complex set of facts and demands for relief.
By the time I came to the end of the FINRA Arbitration Decision, I had formed an opinion of Brady as a somewhat sympathetic figure who was battling on against a big broker-dealer that was sort of throwing its weight around. After all, three independent arbitrators heard all the testimony and read all the evidence and concluded that Ameriprise had defamed Brady. You and I were not in the hearing room and, as such, we must give great weight to the arbitrators decisions.
As is my penchant, when writing the first-draft of a blog about a FINRA arbitration, I confine myself to the four-corners of the published FINRA Arbitration Decision. Frankly, more often than not, that's about all we've got to go with. After I've written my first draft, however, I then tend to poke around a bit and see what's what with the various players. Sometimes my online research simply confirms what the Decision says or what I inferred; other times, though, the results of my research make me pause and re-think my first impression.
Whatever opinions that you formed from the content and context of the disputes set forth in the FINRA Arbitration Decision, see how the following additional information confirms or challenges your thoughts;
Online FINRA BrokerCheck records as of February 1, 2018, disclose that Brady was first registered in 1993, and was registered with Ameriprise from January 2012 to October 2016.
Under the BrokerCheck heading of "Customer Dispute-Settled" are two disclosures. UBS reported its receipt of a customer complaint on January 31, 2005, seeking $40,000 in damages for allegedly unsuitable recommendations that was settled on November 8, 2006 for $7,500 without contribution from Brady. Also, UBS reported its receipt of a customer complaint on September 29, 2003, seeking $46,554 in damages for allegedly unsuitable recommendations that was settled on January 4, 2004, for $69,000 without contribution from Brady.
Under the BrokerCheck heading "Customer Dispute-Closed-NoAction/Withdrawn/Dismissed/Denied" is the disclosure by UBS of its May 7, 2003, denial of a April 17, 2002, customer complaint about misrepresentations involving an annuity.
2017 FINRA AWC
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Cheryle Anne Brady submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Cheryle Anne Brady, Respondent (AWC 2016051588201, October 6, 2017). As set forth in the "Overview" section of the 2017 Brady AWC:
In June 2016, Brady's registered sales assistant placed ten trades in nine of her customers accounts. These trades were placed without first obtaining the customers' approval. When Ameriprise investigated those trades, Brady falsely stated that she had contacted the customers before the trades were placed. By doing so, she violated FINRA Rule 2010.
In accordance with the terms of the AWC, FINRA imposed upon Brady a $7,500 fine and a six-month suspension from associating with any FINRA member firm in all capacities.
Statement of Corrective Action
The 2017 Brady AWC includes a provision under "III. OTHER MATTERS" that states:
D. I may attach a Corrective Action Statement to this AWC that is a statement of demonstrable corrective steps taken to prevent future misconduct. I understand that I may not deny the charges or make any statement that is inconsistent with the AWC in this Statement. This Statement does not constitute factual or legal findings by FINRA, nor does it reflect the views of FINRA or its staff.
Brady submitted a "Statement of Corrective Action," which, in part, states:
RESPONDENTS STATEMENT OF CORRECTIVE ACTION
1. I, Respondent Cheryle Anne Brady state that I sincerely regret my actions in making knowingly false statements to my firm's compliance personnel during an investigation in writing and in an interview. That behavior was inconsistent with high standards of commercial honor as required under FINRA Rule 2010. I pledge that going forward after this incident 1 will return to my previous adherence to this and all other FINRA rules.
2. To avoid any repetition of this or similar incidents in the future I will immediately report any suspected cases of unauthorized trading or any other rule violations I may observe to my Branch Manager or Compliance Officer.
3. Immediately I shall study the F1NRA publication entitled: Registered Representative Brochure, identified as publication 17_0144.1 -05/17.
4. When hired in the future as a Registered Associate of a Member Firm I will study and act in strict accordance with the Firm's Compliance Manual and Code of Conduct.
5. I accept the sanctions agreed upon in this Letter of Acceptance, Waiver and Consent and realize the seriousness of my lapse in judgment and honesty. This or similar behavior will not occur again.
THIS CORRECTIVE ACTION STATEMENT IS SUBMITTED BY THE RESPONDENT. IT DOES NOT CONSTITUTE FACTUAL OR LEGAL FINDINGS BY FINRA, NOR DOES IT REFLECT THE VIEWS OF FINRA OR ITS STAFF.