February 20, 2018
As readers of the BrokeAndBroker.com Blog know, pro se litigants don't always obtain a great outcome. In some cases, the financial award rendered in favor of or against a self-represented party justified the decision to no incur legal fees. In other cases, self-represented parties could not afford to hire a lawyer and suffered for the lack of counsel. In a recent FINRA intra-industry arbitration, a former associated person sued his former employer firm in an effort to obtain the expungement of disputed language from his Form U5/CRD records. There is no question that this pro se Claimant walked away a winner. There is a question as to whether he should have sued for more.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2017, Claimant Seyboldt, representing himself pro se, sought the expungement of language from his Central Registration Depository records ("CRD") and $1 in compensatory damages. In the Matter of the FINRA Arbitration Between Eric Seyboldt, Claimant, vs. Nationwide Securities, LLC, Respondent (FINRA Arbitration #, DATE).
As set forth in the FINRA Arbitration Decision:
Claimant alleged that at the time of his resignation in January 2016, and prior to Respondent concluding an investigation, it added language that mischaracterized his status and gave a false impression of his employment at Nationwide. . .
Respondent Nationwide did not oppose Claimant's request for expungement.
The Sole FINRA Arbitrator found Respondent Nationwide liable and ordered it to pay to Claimant Seyboldt $1 in compensatory damages.
3. FULL TERMINATION
Is this a FULL TERMINATION?
Note: A "Yes" response will terminate ALL registrations with all SROs and all jurisdictions.
Reason For Termination:
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?
Based upon a finding of defamation, the FINRA Arbitrator recommended the expungement of the "Termination Comment" from Claimant's Form U5 as filed on January 15, 2016,. The Arbitrator determined that the "Termination Comment" should be "blank" and that the "Reason for Termination" shall remain unchanged. In furtherance of his recommended expungement, the Arbitrator recommended that the "YES" answers to Questions 7B and 7F(1) on the Form U5 be changed to "NO" and the accompanying Disclosure Reporting Pages be deleted in their entirety. In reaching those recommendations, the Arbitrator offered this rationale;
[T]he Arbitrator made a finding that Respondent drew premature conclusions regarding Claimant's conduct prior to the completion of an investigation. As a consequence, Claimant was unable to secure alternate employment due to Respondent's CRD language. Both parties have concluded the CRD language should be expunged to avoid additional harm to Claimant. . .
Bill Singer's Comment
A noteworthy aspect of this FINRA Arbitration Decision is a rare finding that "Claimant was unable to secure alternate employment due to Respondent's CRD language." You rarely, if ever, see such a determination because it is difficult to prove a nexus between allegedly defamatory U5/CRD language and decisions to not hire an associated person.
It would have been helpful for the FINRA Arbitrator to have set forth the inappropriate comments so that we could better appreciate the nature of the defamation, however, that act of disclosure would likely further victimize Claimant Seyboldt and, as such, I understand the omission. Similarly, from the professional perspective of a lawyer who represents folks such as Seyboldt, I would have been interested to learn about the proof that demonstrated how the cited defamation had prevented Claimant's ability to "secure alternate employment." To the extent that the disclosure of such proof would also have served to victimize Claimant, I will also defer to the Arbitrator's discretion.
The award of $1 in monetary damages to Claimant is also a rare award in similar FINRA expungement cases. Given that Respondent Nationwide did not oppose Claimant's expungement request, given that the Arbitrator found defamation, given that the Arbitrator awarded $1 in compensatory damages, and given that the Arbitrator recommended expungement, I'm sort of left wondering (profoundly) whether Claimant should have asked for a more significant monetary damage and also requested punitive damages. Be that as it may, congratulations to Seyboldt for representing himself and securing an excellent outcome.
FINRA Rule 2080: Obtaining Customer Dispute Expungement
FINRA Rule 2081: Prohibited Conditions Relating to Expungement of Customer Dispute
FINRA Rules 12805 and 13805: Expunging Customer-Dispute Information Under Rule 2080
READ the BrokeAndBroker.com Blog Expungement Archive