September 14, 2018
Today's BrokeAndBroker.com Blog presents two Deutsche Bank Securities registered representatives with decades of industry employment. In a FINRA arbitration, the reps alleged that Deutsche Bank Securities had filed inaccurate, defamatory regulatory disclosures about purported customer complaints. Tempers must have been heated because the combined damages sought by the reps were over $10 million. When the awards were announced by the arbitrators, Deutsche Bank may have wished it had opted to settle. Then again, if the Claimants refused to come down from their $10 million demand, the employer's decision to litigate to the bitter end may have had merit.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in September 2016, associated person Claimants Haney and Staton asserted defamation in connection with Respondent Deutsche Bank Securities' characterization on their Uniform Industry Notice of Termination ("U5") and Central Registration Depository records ("CRDs"). Claimants Haney sought
$7,500,000.00 in damages inclusive of lost earnings and lost earnings capacity, and Claimant Staton $2,600,000.00 damages inclusive of lost earnings and lost earnings capacity. Further, each Claimant sought punitive damages, interest, costs, fees, expenses, and the expungement of all references to this matter from their CRD. In the Matter of the FINRA Arbitration Between Kurt Wesley Haney and Robert Harding Staton, Ill, Claimants, vs. Deutsche Bank Securities, Inc., Respondent (FINRA Arbitration 16-02761, September 6, 2018).
Respondent Deutsche Bank Securities generally denied the allegation and asserted various affirmative defenses.
Did You Notice?
The FINRA Arbitration Panel ordered Claimants to send a copy of the Statement of Claim to the customers involved in what is referenced as Occurrences 1908378 and 1908379 and to notify them of their right to make a written submission setting forth their positions with respect to the expungement request. In response to Claimants service of the claims, the customers responded with no objection to the requested expungements.
The FINRA Arbitration Panel found Respondent Deutsche Bank Securities liable and ordered it to pay to:
Claimant Haney: $1,416,000.00 in compensatory damages plus interest.
Claimant Staton: $1,345,000.00 in compensatory damages plus interest.
Additionally, the Panel ordered Respondent to pay to Claimants:
- $9,500.00 in expert witness fees;
- $750.00 of the initial claim filing fees; and
- $142,749.00 in attorneys' fees
The FINRA Arbitration Panel recommended expungement for both Claimants and provided the following individual rationale:
Claimant Haney (Occurrences 1908378, 1908379 and 1881645)
Having found the challenged disclosures to be defamatory, the Panel recommended the expungement of Occurrence 1881645 from the "Reason for Termination Explanation" on Haney's Form U5 with the revision of the reason to "Voluntary," and with a blank accompanying explanation. The Panel recommended conforming changes of "NO" to Question 7F(1) and the deletion of the Termination Disclosure Reporting Page.
SIDE BAR: Uniform Termination Notice for Securities Industry Registration ("Form U5")
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 FINRA Rule 2080 finding that the claim, allegation, or information is false, the Panel recommended the expungement of Occurrences 1908378, 1908379 and 1881645 from Haney's CRD (they did not appear on his Form U5).
The Panel provided the following explanation:
During the hearing, testimony was repeatedly given that significant confusion existed in marketing the convertible debentures. Deutsche Bank management was responsible for setting policies and for determining suitability in the marketing of the convertible debentures. Deutsche Bank management did not provide clear and timely communications to Claimant Haney. Claimant Haney relied upon very limited communications from management regarding the policies, procedures and direction for handling the convertible debenture clients.
Claimant Staton (Occurrence 1881644)
Having found the challenged disclosure to be defamatory, the Panel recommends the expungement of the "Reason for Termination Explanation" from Staton's Form U5 with the revision of the reason to "Voluntary," and with a blank accompanying explanation. The Panel recommended conforming changes of "NO" to Question 7F(1) and the deletion of Termination Disclosure Reporting Page.
The following fees were charged to the parties:
Respondent Deutsche Bank:
- $4,025.00 Member Surcharge
- $7,000.00 Member Process Fee
- $3,000 postponement fees
- $12,450 in hearing session fees
Claimants Haney and Staton: $ 2,250.00 Initial Claim Filing Fee
Bill Singer's Comment
This arbitration presents a somewhat perfect example -- albeit frustrating -- of the need to balance the competing equities of, on the one hand, the public's and the industry's right to know what the hell went on here, and, on the other hand, the appropriateness of not adding insult to injury by re-stating defamatory allegations against now-vindicated, veteran registered representatives. Sometimes, I am outraged by the lack of disclosed content and context in FINRA's published materials -- not this time. I have reviewed both Claimants' industry records and but for the occurrences referenced in this expungement case, those records are fairly pristine. Ultimately, justice is done by burying this case and its underlying disclosures.