Sleeping Dog Bites Former Raymond James Employee After Form U5 Expungement

July 23, 2012

a sleeping dog -- you sure ya wanna wake him?

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claimfiled in December 2011, Claimant Raay asserted libel; defamation; breach of contract and, fraud in connection with the filing of his Uniform Termination Notice for Securities Industry Registration ("Form U5") by respondents Raymond James. Claimant sought an:

  • expungement and amendment of the U5;
  • issuance of a permanent injunction enjoining Respondents from
  • filing a false U5 regarding Claimant, and
  • soliciting, accepting business from or otherwise contacting Claimant's clients; and
  • at least $48,000 in damages including fees and costs.

In the Matter of the FINRA Arbitration Between Eduard Van Raay, Claimant, vs. Raymond James Financial Services, Inc. and Raymond James Financial Services Advisors, Inc., Respondents (FINRA 11-04544, July 16, 2012).

Respondents generally denied the allegations and asserted various affirmative defenses.


Respondent Raymond James Financial Services Advisors, Inc. is not a member of FINRA but voluntarily submitted to FINRA jurisdiction via its filing of a Statement of Answer and executedSubmission Agreement,  and, accordingly, was bound by all determinations of the sole FINRA Arbitrator.


On or about May 21, 2012, the parties settled this matter and requested that an arbitrator be appointed solely for the purpose of considering Claimant's expungement request.


The sole FINRA Arbitrator hearing this matter recommended the expungement of the Reason for Termination and accompanying Termination Explanation from

  • Section 3 of Claimant Raay's Form U5, filed on November 7, 2011, by Respondents and as maintained by the Central Registration Depository ("CRD"); and
  • Items 2 and 4 on the Disclosure Reporting Page on Claimant's Initial Form U4 filed on December 13, 2011, and on  Amended Forms U4 filed on December 14, December 19, and December 20, 2011, by his current employer Kovack Securities Inc.

The recommendation was that the current Reason for Termination  be replaced with "Permitted To Resign," and the accompanying Termination Explanation be replaced with:

Advisor chose to continue unapproved outside business activity

Bill Singer's Comment

According to online FINRA disclosures as of July 23, 2012, on November 2, 2011, Respondent Raymond James "Discharged" Respondent Raay for:


Raay's contemporaneous response to those allegations is disclosed on his FINRA disclosure page as:


In response to queries from potential registered representative clients about whether or not to seek an U5/CRD expungement, I often offer an admonition about making a mountain out of a molehill and/or about letting sleeping dogs lie. Wall Streets employees must often tip toe around sleeping pit bulls when it comes to employment disputes.  After waves of industry lay-offs, FINRA's arbitration docket was filled with all sort of employment cases - Merrill Lynch, Wachovia, Lehman Brothers, Smith Barney, Citigroup, JP Morgan, Goldman Sachs, to name only a very few.

Mountains And Hills

Times are still tough and registered persons must carefully think whether they want to make a big deal out of something that industry veterans might simply shrug at.  The decision to file an arbitration Complaint against a former employer may arise from a sincere and valid desire to vindicate one's reputation; however, attendant to taking such a step is branding yourself as someone willing to sue a former employer.  Sure - sometimes there's simply no way to avoid such a mark if you're going to demand justice. I get that and I fully explore that issue with my client; however, the value of any vindication needs to be weighed against the altered dynamic of now walking into a manager's office trying to land a job offer but your history include a lawsuit against a former employer.  That's the harsh, cold reality of these things.

Sleeping Dogs

As to my second admonition - letting sleeping dogs lie - imagine that you were terminated in 2011 for what you believe is nonsense.

In the first scenario, let's pretend it's 2013 and you're being interviewed for a new job and being asked about what the 2011 termination was about. You voice your outrage and pooh pooh the incident. You say that in your opinion it was nonsense, that FINRA never charged you with a violation, that no customer sued, that no settlement dollars were paid, and that, truth be told, you were working for idiots and were just as happy to be rid of those morons.  A tale told quite frequently in these post-Lehman, post-Bear Stearns, post-2008/2009 market crash days. Fact is, there's also a good chance that the man or woman interviewing you was a refuge from the closing or reduction-in-force of another brokerage firm.  The point is that in misery there is often commiseration.  Your explanation about your U5/CRD during an employment interview may resonate favorably. If you don't wake the sleeping dog, you probably won't get bit.

Now, let's consider an alternative scenario where you walk into that same 2013 job interview with the same 2011 Form U5 but you have the added baggage of a 2011 FINRA Arbitration Statement of Claim and a 2012 nastyAnswer (that spells out the details) from the sued firm and a 2013 FINRA Arbitration Decision that doesn't fully exonerate you. Worse, instead of this event setting up as something from a couple of years ago in 2011, it looks more like a protracted litigation that took two years and only just concluded. Oops, you awakened the sleeping dog and got nipped.

Ahh, now that's the stuff that separates the re-employed former employee from the still-looking-for-work former employee.  There are no simple answers. It's all going to depend upon the unique facts and personalities. Regardless, never, ever rush into any lawsuit.  Consider the legal costs.  Consider the likely outcomes. Do a cost-benefits analysis. Then, after you've figured out whether it's all financially worthwhile, ask yourself if it's worthwhile in terms of your reputation and career prospects.  Some wounds heal. Some wounds fester. Just make sure that you're outrage isn't reduced to little more than picking at scabs.

Case In Point

In Raay's case, I don’t understand Respondent's explanation on his U5. The disclosure seems to suggest that Raay was terminated for having a personal relationship with a client - which, after some 30 years on Wall Street's regulatory scene, isn't any violation that I'm aware of. True, the U5 clearly asserts that Raay had engaged in a prohibited "Outside Business Activity," ("OBA") but beyond that mere allegation there isn't a shred of any specific allegation of the OBA at issue.  Further, we see no evidence in Raay's online FINRA record of a customer complaint, a settlement with a customer, or any regulatory action. On top of that, Raay's online response is noted as deeming the allegations as "unjust."

Supposing that Raay had simply noted his contrary view and left things at that? He walks into an office of a hiring manager and chances are the interviewer would scratch his head, ask what the hell is this about, and depending upon Raay's trailing-12-months production or his interview skills, an offer would (or would not) be forthcoming.  In fact, Raay got quickly registered with Kovack Securities in 2011 prior to the 2012 settlement of his arbitration and recommended expungement.

What troubles me about the resolution of this arbitration is that the FINRA Arbitrator's recommended revised language doesn't strike me as an improvement for Raay - much less a victory. Maybe it's just me, but I find the recommended revised explanation for the resignation as far worse than the haphazard and vague language used on the disputed U5.  Raay's CRD will now disclose that he chose to continue unapproved outside business activity, which strikes me as far worse than being involved in a personal relationship with a client.

Maybe Raay got a few bucks from the undisclosed settlement of this case. Maybe the dollars added up and the case was worth it. We don't know what we don't know.  Maybe the stuff about his former firm poaching his clients or interfering with his business was favorably resolved in the settlement. Those are things we can only speculate about. Still - for me, this arbitration didn't turn out well enough to likely warrant the costs or the risks.  Of course, hindsight gives us all great vision, so who knows what the expectations were when the Complaint was first filed?  Nonetheless if I'm scoring this fight, maybe it's a draw, at best; but I'd probably give it to the Respondents on points.  I'd have let Fido asleep.