In a FINRA Statement of Claim filed in October 2009, Claimant Kevin T. Grier sought in excess of $5 million in compensatory damages and $25 million in punitive damages, plus attorneys' fees and other costs. He also sought expungement of defamatory statements on his Form U5. Respondent Keybanc Capital Markets, Inc. generally denied the allegations and asserted various affirmative defenses. In the Matter of the Arbitration Between: Kevin T. Grier,Claimant, versus Keybanc Capital Markets, Inc., Respondent. (FINRA Arbitration 09-06039, September 8, 2010)
The Panel did not award any monetary damages but recommended that the reason indicated under Termination Explanation in Section 3 of Claimant's Form U5 be replaced with: "Management Discretion." However, he Panel allowed "Discharged" to remain as the Reason for Termination."
In addition, the Panel recommended that Claimant Grier's Intemal Review Disclosure Reporting Page of Form U5 (Part 1. Comment 3) be amended to add that the:
"investigation has been closed with respect to Mr. Grier without any finding that he diverted corporate opportunities for his own benefit"
Based upon a finding of defamation, the Panel recommended that the "Yes" answers to questions 7(F)(1) and (2) of Form U5 and Questions 14 (J)(1) and (2) of Form U4 be changed to "No" and that the accompanying Termination Disclosure Reporting Pages be deleted in their entirety.
Bill Singer's Comment: As is typical in these expungement rulings, the Claimant's registration records are not automatically amended to include the changes recommended by the Arbitration Panel. Even in an intra-industry FINRA arbitration, Claimant must forward a copy of the Award to FINRA's Registration and Disclosure Department for the proposed amendments to be incorporated into his registration records.
At first blush the FINRA Arbitration Panel's ruling may seem a dubious victory, at best. However, Claimant Grier won some important battles here.
The Panel clearly marked his former firm's internal investigation of Grier as "closed." As such, when a future employer pulls up Grier's U5, it won't look as if there is some potentially serious, ongoing internal review. Moreover, as if to foreclose any negative inferences, the Panel further included the notation that the review closed without a finding that Grier had "diverted corporate opportunities for his own benefit." Further, as if adding final nails into a coffin, the Panel makes it clear through proposed "No" answers on Grier's Forms U4/U5 that his discharge was not predicated upon any accusation of violating investment-related statutes, regulations, rules or industry standards of conduct; of of any accusation of fraud or the wrongful taking of property.
Under the heading of "Termination Disclosure, " Form U4 and Form U5 seek "Yes" or "No" answers to the following queries:
On Form U4, Item 14J:
Have you ever voluntarily resigned, been discharged or permitted to resign after allegations were made that accused you of:
On Form U5, Item 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?