Claimant requested the expungement of information contained on her Form U5. Pointedly, Claimant sought to clarify that she did not commit fraud and did not wrongfully take property. Ultimately, Claimant sought $100,000 in damages and payment of all fees. In the Matter of the FINRA Arbitration Between Iliana Perales, Claimant, vs. Chase Investment Services Corp. and Chase Bank, Respondents (FINRA Arbitration 09-05959, June 6, 2011).
Respondent Chase Bank is not a member or associated person of FINRA and did not voluntarily submit to arbitration. Therefore, the FINRA Arbitration Panel made no determination with respect to Claimant's claims against Respondent Chase Bank.
At the close of Claimant's case in chief, Respondent CISC made an oral Motion for Directed Verdict on the issue of wrongful termination and on the entire case. The FINRA Arbitration Panel granted the wrongful termination motion but denied the Motion for Directed Verdict as to the entire case.
The FINRA Arbitration Panel found Respondent CISC liable to and ordered it to pay to Claimant $75,000.00 in compensatory damages on the defamation claim.
Based upon a finding that aspects of the commentary on Claimant's Form U5 dated Febmary 19, 2009, as filed by Respondent CISC were defamatory, the Panel recommended the expungement of the Termination Comment in Section 3 of Claimant Perales's Form U5 . The current Termination Comment states:
Terminated by affiliate bank - non securities related. Registered Rep allegedly added herself as TOD on the bank and brokerage accounts of a customer who was also her personal friend. Registered Rep alleges customer approved and signed TOD documentation.
The FINRA Arbitration Panel recommended the deletion of the above language in its entirety and proposed the following substitution:
Registered Rep., who was employed in a non-securities related position as a personal banker with an affiliate bank, was terminated from her at-will bank position. At customer's request registered rep. added her name as TOD on his brokerage account. Registered rep had a close personal relationship of long stending with customer. The customer requested, approved and signed TOD documentation. This may have violated bank's policy.
The FINRA Panel decided that the Reason for Temnination of "Discharged" shall remain. Further, the Panel recommended that the "Yes" answers on the Form U5, Sections 7B: Internal Review Disclosure and 7F(1): Termination Disclosure , be deleted and replaced with "No," and that the accompanying Disclosure Reporting Pages ("DRP") be deleted as a consequence.
SIDE BAR: Although not defined in the FINRA Decision, I suspect that the term "TOD" refers to an account status that is "Transfer-On-Death" (in contradistinction to "Pay-On-Death ("POD").
Essentially, in a TOD account, the securities would be transferred to the named surviving beneficiary(s) outside of probate and often on a "stepped up" tax basis that imposes a fair-market value on an asset as of the date of the decedent's death rather than at the date of acquisition.
WARNING: This comment is intended only as a general discussion of the topic and is pointedly not to be relied upon as legal and/or tax advice. You must consult with an independent professional concerning any brokerage account, estate planning, or tax issue and should not rely upon this commentary as dispositive.