In a Statement of Claim Filed in April 2009, Claimant Banc of America Investment Services, Inc. (BOA) alleged, in part, that its former associated person J. Michael Sciara was liable for damages which became due and payable at the time of his termination on December 31, 2004. In accordance with the terms of two Promissory Notes dated Febmary 14, 2003 and September 25, 2003 (the "Notes"), Claimant alleged that Respondent Sciara failed to make payments to Claimant and that additionai interest, attorneys' fees and costs have accrued..  NOTE: In connection with its purchase of Merrill Lynch & Co., Inc. by BOA in October 2009, BOA merged with and into Merrill Lynch, Pierce, Fenner & Smtth Incorporated. .

Claimant sought:

• $48,040.00 in principal;
• $14,712.98 in interest (through May 21,2010);
• $13,372.60 in attorneys' fees; and  
• $ 4.469.68 in costs.

TOTAL: $80,595.26

Respondent Sciara represented himself (pro se) and requested dismissal of the Statement of Claim in its entirety. In the Matter of the Arbitration Between Banc of America Investment Services, Inc., Claimant, versus J. Michael Sciara, Respondent (FINRA Arbitration #09-02079, August 3, 2010).

Settlement Agreement

In May 2010, the parties resolved their dispute by executing a Settlement Agreement, which required that the Stipulated Award shall be signed by a FINRA arbitrator but no action will be taken by Claimant to enforce the Stipulated Award unless Respondent fails to comply wtth the payment terms of the Setttement Agreement. Should Respondent abide by the Settlement Agreement's terms, the Stipulated Award shall be deemed to be satisfied.

The Stipulated Award granted the following relief to Claimant:

• $80,595.26;
  
• $14,712.98 in accrued interest through May 21, 2010;
  
• $13,372.60 in attorneys' fees; and
  
• $4,469.68 in costs plus interest at the rate of 10% per annum from May 21, 2010 through the date of payment, less any amounte paid by Respondent under the Setttement Agreement.

Bill Singer's Comment: As I have previously noted, we are seeing a number of Pro Se cases involving these promissory note / employee forgivable loan issues.  The self-representation is likely a result of the dire financial status of many registered persons as a result of the economic impact of the Great Recession.  Not having sufficient funds to honor their debts, these same brokers similarly lack the funds to retain competent legal counsel.  That is not intended as a criticism of the trend -- it is merely an observation.  However, the lack of a lawyer may well have some negative impact upon the outcomes.

As discussed in prior blogs on this topic, an emerging result with many Pro Se Respondents is that the settlements seem to be dollar-for-dollar everything initially sought by the former employer -- that's the whole hog of principal, past-due interest, ongoing interest, attorneys' fees, forum fees, and attendant costs.  Not exactly a great deal but, perhaps, not necessarily a terrible one.

The cost for retaining a lawyer in these types of matters, even if only for the purpose of pounding out the settlement, may easily be at least $5,000, if not considerably more.  If the case goes to a contested hearing, count on considerably more.  If you don't have the bucks to pay that freight, there's no point in bemoaning the absence of an attorney.  Further, you may be able to bang out a settlement on your own that results in a better net outcome than one that involved paying a lawyer's fees. I've always been candid and blunt about these financial considerations and will not change my stripes now.

The ultimate issue is whether a lawyer can obtain a settlement for significantly fewer total dollars and for payments over a more extended period of time -- and whether such an enhancement is worth the legal fee.  Sometimes there's just no way of knowing until after you've paid the retainer and thrown the dice. 

Similarly, many brokers should also explore the benefit (or detriment) of seeking a discharge in bankruptcy and scheduling the debt as just another financial obligation covered in the filing.  Although you will have a "yes" answer on your Form U4 concerning such bankruptcy, contrary to popular misconception, it does not rise to a statutory disqualification.  

Sadly, there is just no one-size-fits-all formula for deciding whether or not to retain a lawyer for these cases.  You might want to negotiate a limited fee for the sole purpose of reviewing the facts in your case and obtaining legal counsel on how to best negotiate with your former firm, what target numbers you should press for, and whether bankruptcy is a sensible/viable option.  Similarly, you could explore with a lawyer to option of a Settlement-Only Legal Retainer that would only involve efforts by your lawyer to secure a settlement on terms acceptable to you and subject to a project-rate or fee cap on the lawyer's fees.  If you don't know competent securities-industry counsel, you can always Google the contact information for local bar associations, which typically offer a free or low-cost initial consultation with attorneys in your community.