Registered Rep Sues Over Commission And Deferred Comp

November 21, 2014

Few battles on Wall Street become more pitched than those involving disputes over a registered person's commissions, fees, or bonuses.  Typically, the stockbroker or trader feels short-changed. The numbers don't add up. You didn't give me credit for that deal. You promised to pay me more. In today's Blog, we consider claims about unpaid commissions and the calculation of deferred compensation.

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in November 2013, Claimant Kelly asserted breach of contract attendant to Respondent SagePoint's alleged failure to pay him commission compensation and Respondents purportedly improper calculation and valuation of his deferred compensation. Initially, Claimant sought $364,000 in actual/compensatory damages plus punitive damages, interest, attorneys' fee, and costs; however, at the hearing, the compensatory damages were reduced to $178,627.92. In the Matter of the FINRA Arbitration Between Patrick Kelly, Claimant, vs. SagePoint Financial, Inc. f/k/a AIG Financial Advisors, Inc., SAI Deferred Compensation Holdings, Inc. and American International Group, Inc., Respondents - AND -- SagePoint Financial, Inc. f/k/a AIG Financial Advisors, Inc., Counter-Claimant, vs. Patrick Kelly, Counter-Respondent (FINRA Arbitration #13-03278, November 13, 2014).


Respondent SagePoint Financial, Inc., generally denied the allegations, asserted various affirmative defenses, and filed a Counterclaim asserting contractual indemnity. Specifically, 
Respondent SagePoint cited its costs in defending 
  • a previously filed civil action in Hennepin County District Court (no citation provided in the Decision) that was purportedly abandoned by Claimant Kelly; and 
  • the FINRA arbitration reported here. 
Counterclaimant SagePoint sought $95,233.92 in actual/compensatory damages.

Cuttin' 'em Loose

The FINRA Arbitration Panel declined to adjudicate any claims against Respondents SAI Deferred Compensation Holdings, Inc. and American International  Group, Inc. because those entities are not FINRA members, they did not enter into any contract to submit to arbitration, and are not subject to FINRA jurisdiction. 


The FINRA Arbitration Panel found Respondent SagePoint liable to and ordered it to pay to Claimant Kelly $17,572.51 in compensatory damages with 4% interest from January 1, 2008, until the Award is paid.

SagePoint's Counterclaim was denied and dismissed with prejudice. 

Bill Singer's Comment

Regular BrokeAndBroker Blog readers know that I HATE these types of FINRA Arbitration Decisions, which tease us with an interesting fact pattern, make short shrift of meaningful facts, and then pronounce in conclusory fashion an Award.  

The Kelly Arbitration is a relatively rare intra-industry commission/compensation dispute that made it all the way to verdict. The bulk of these matters tend to get settled . . . quietly. Consequently, it would have been nice if this FINRA Arbitration Panel had provided us with more meat on these bones in terms of the underlying dispute and the rationale for the award. As I often gripe, we needed more content and context.

For starters, the Decision offers us virtually no background beyond a useless regurgitation of the allegations by Claimant Kelly that he had not been paid commissions and that his deferred comp was not properly calculated. Similarly, the Decision offers no insight about Counterclaimant SagePoint's assertion that it had incurred unnecessary costs in some prior civil litigation.  I mean, seriously, couldn't these arbitrators offered us some further explanations?

Finally, just what the hell are we supposed to make of a verdict that awarded Claimant Kelly about $17,500 in damages as against his last demand for nearly ten times that amount? How was that dollar amount calculated?  What was the Panel's rationale for awarding a relative pittance versus what was demanded?

In the end, we are left with far too many unanswered questions.  Certainly, this can't be the best that FINRA Dispute Resolution can offer to the industry and the public concerning the adjudication of disputes.