In a recent FINRA intra-industry arbitration, we come across a former Scottrade Senior Manager of Brokerage Operations, who alleged that following his role in a workplace altercation, he was terminated in a manner that discriminated against him on the basis of age and race. The parties settled the matter and the associated person pursued an expungement of his industry record. Exactly what happened is not substantively disclosed in the FINRA Arbitration Decision. The terms of the settlement are not revealed. What the arbitrators deemed defamatory is not spelled out. To quote Bob Dylan's "Ballad of A Thin Man" And you know something's happening but you don't know what it is, do you, Mr. Jones?
Case In Point
In a FINRA Arbitration Statement of Claim filed in April 2018, associated person Claimant Robert William Brangle, Jr. asserted against his former employer, FINRA member firm Scottrade Inc.: wrongful termination; retaliation; and employment discrimination in violation the federal Civil Rights Act, the Age Discrimination Employment Act, and the Missouri Human Rights Act. Claimant sought the expungement or modification of certain information from his Central Registration Depository record. The FINRA Arbitration Decision characterizes the causes of action as arising from:
[C]laimant's allegation that Respondent treated him
differently than other employees, because he was a Caucasian male over the age of
forty years old, when it terminated his employment after he was involved in a workplace
altercation and when it opposed his attempts to obtain benefits from the Division of
Claimant Brangle sought compensatory and punitive damages plus interest, fees, and costs. In the Matter of the Arbitration Between Robert William Brangle, Jr., Claimant, v. Scottrade Inc., Respondent (FINRA Arbitration Decision 18-01519) http://www.finra.org/sites/default/files/aao_documents/18-01519.pdf
Respondent Scottrade generally denied the allegations and asserted various affirmative defenses.
In March 2019, the parties settled the case and Claimant withdrew all requests for relief with the exception of expungement. Respondent did not oppose the expungement. The FINRA Arbitration ordered the parties to submit a copy of their settlement agreement pending the issuance of an Award.
The FINRA Arbitration Panel found that the Form U5 filed on October 24, 2017, by Respondent Scottrade contained defamatory information and, accordingly, recommended that the expungement of both the "Reason for Termination" and the "Termination Explanation," and that the revised language state, respectively, "Other" and "Termination by mutual consent of the parties."
FINRA and/or the Panel assessed the following fees:
Respondent Scottrade: $1,900 Member Surcharge; $3,750 Member Process Fee; $300 Discovery-related motion fees; $5,625 hearing session fees.
Bill Singer's Comment
And you know something's happening but you don't know what it is, do you, Mr. Singer?
As readers of the BrokeAndBroker.com Blog know -- perhaps ad nauseum -- I am a persistent and unrepentant critic of mandatory arbitration, particular the version espoused by FINRA and forced upon public customers and the industry's hundreds of thousands of associated persons. I am not opposed to consensual arbitration but detest the hypocrisy attendant to Wall Street's approach to forcing customers to arbitrate their grievances as a pre-condition to opening a brokerage account. Think I'm over-stating the proposition? Fine -- cross out the arbitration clause in any new account agreement with any FINRA member firm and see if they open your account. Similarly, I am opposed to Wall Street's resort to mandatory intra-industry arbitration, which is too often a convenient device by which bad actors get to hide their dirty laundry.
To be clear, it may very well be that Claimant Brangle was just as eager as Respondent Scottrade to resolve their dispute in the very manner achieved in this FINRA Settlement Decision. And if that's the case, bravo -- I support the right to engage in private dispute resolution. On the other hand, imagine that there are other similarly situated industry employees at Scottrade or at other FINRA member firms with wrongful termination, retaliation, and/or discrimination claims. They learn nothing from this published FINRA Arbitration Decision. Imagine that in the near future, there are industry employees who would (or would not) sue their employers based upon the revelations contained in Brangle (but not disclosed). In disputes that play out in the state and federal courts, absent a court order of confidentiality or sealing of the record, the allegations, evidence, and testimony is available in the court file. Most importantly, please don't lose sight of the fact that Brangle was alleging age and racial discrimination.
Is it a legitimate trade-off for FINRA member firms and their associated person to have FINRA arbitration as an alternative dispute resolution vehicle? Sort of depends. For the firms, it seems like a grand bargain that keeps everything under wraps. For the associated men and women forced into this system, it seems a contract of adhesion rather than the byproduct of negotiation and consent. That being said, Claimant Brangle may well be thrilled with the outcome of his settlement, which may have largely been prompted by the confidentiality that I am ranting about in this commentary. Take the same case to court where everything is spread out on the public record and that might not motivate Scottrade to settle -- or it might deter Brangle from filing in the first place. As such, confidentiality may be a two-edged sword.
In the end, Brangle is not being paid to champion constitutional rights. He is a former employee seeking redress for his personal grievances. I acknowledge that. I accept it. Nonetheless, if FINRA arbitration is, indeed, fair, cost-effective, and expeditious, then why is there a need for the industry and its self-regulator to force it upon Wall Street's associated persons -- and public customers? Shouldn't the power of the example outweigh the example of the power?