Wells Fargo / Wachovia Loses Slam Dunk FINRA EFL / Promissory Note Arbitration

August 15, 2011

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2009, Claimant Wells Fargo Advisors alleged breach of a promissory note dated February 8, 2008 (the "PN"), by its former employee Respondent Lowther. Ultimately, Claimant sought $239,215.28 representing the principal balance due under the PN; 7 % interest from August 6, 2009; attorneys' fees; arbitration costs; and other relief.  In the Matter of the FINRA Arbitration Between Wells Fargo Advisors, LLC f/k/a Wachovia Securities, LLC, Claimant, vs. Stephen W. Lowther, Respondent (FINRA Arbitration 09-06144, August 9, 2011)

Respondent  Lowther generally denied the allegations, asserted affirmative defenses, and filed a Counterclaim alleging, among other things, fraud and defamation. Respondent sought unspecified monetary damages; punitive damages; various costs, fees, and expenses; and an expungement of his Form U5. Respondent was represented by legal counsel until on or about November 3, 2010, at which time he appeared pro se.

The FINRA Arbitration Panel denied Claimant Wells Fargo's claims.  Additionally, the Panel denied Respondent's claims, including his request for an expungement.  

Bill Singer's Comment

Not a particularly complicated case. An employee is given a employee forgivable loan ("EFL") in the form of a PN.  If the employee leaves prior to the expiration of the term of the PN, any unaccrued balances remain as a loan and are subject to repayment.  Unfortunately, the FINRA Decision in this matter fails to specify the precise terms of the PN but we know that Claimant wanted repayment of at least some $240,000 plus. 

Remarkably, Respondent finished the case as his own counsel and managed to persuade the FINRA Arbitrators that he should be relieved of any obligation to repay the amount in dispute. Given the final findings by the Panel, Respondent clearly emerged as the winner. 

What's the takeaway from this arbitration?  Fairly simple - sometimes if you just hang in there, your former firm's slam-dunk, guaranteed, you're-gonna-regret-this case may prove to be so much hot air.  More often than not, however, you take this type of dispute to a hearing and you're going to wind up on the short end of the stick. On the other hand, every so often, miracles happen.