Texas State Senator Rodney Ellis Wins FINRA Employment Arbitration

October 4, 2016

One thing leads to another. Today's BrokeAndBroker.com Blog is living proof of the wisdom of that observation. We start off with false impressions. A simple FINRA employment arbitration dispute. A generic disagreement over unpaid commissions. A somewhat laughable counterclaim over a computer and a cellphone. All of which ends in a fairly modest financial award. Then Bill Singer, the publisher of BrokerAndBroker.com Blog, starts poking around. It's fascinating what he uncovers.

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2015, former Rice Financial Products Company registered representative Claimant Ellis asserted breach of contract against his former employer. As set forth in the FINRA Arbitration Decision:

[C]laimant alleged that he is owed unpaid commissions under his 2014 Employment Agreement. Claimant alleged that after the six month Employment Agreement expired, Respondent attempted to alter the terms of agreement and, as a result, Claimant was forced to resign.

Claimant Rice sought at least $25,000 in compensatory damages. In the Matter of the FINRA Arbitration Between Rodney G. Ellis, Claimant / Counter-Respondent, vs. Rice Financial Products Company, Respondent / Counter-Claimant (FINRA Arbitration 15-02660, August 24, 2016).


Respondent Rice Financial generally denied the allegations, asserted various affirmative defenses, and filed a Counterclaim alleging that Claimant Ellis had failed to return his computer and Blackberry after ending his employment. At the hearing, Respondent requested $56,028.59 in compensatory damages; $50,000 in attorneys' fees, and unspecified punitive damages.


The FINRA Panel of Arbitrators found Respondent Rice Financial Products Company liable and ordered it to pay to Claimant Ellis $25,558.00 in compensatory damages.

Bill Singer's Comment

You wanna tell me just what the hell this case was about?

The Employment Agreement

I intentionally quoted verbatim the portion of the FINRA Arbitration Decision that constitutes the only reference to any of the alleged facts underlying this employment dispute. Frankly, the sole Public Arbitrator hearing this case didn't provide us with much to go on; and what was provided doesn't necessarily make all that much sense. Pointedly, let's return to this quote from the Decision:

[C]laimant alleged that he is owed unpaid commissions under his 2014 Employment Agreement. Claimant alleged that after the six month Employment Agreement expired, Respondent attempted to alter the terms of agreement and, as a result, Claimant was forced to resign.

I'm trying to follow the logic inherent in that extract but it's a difficult job. We start with the premise that there was a 2014 Employment Agreement. Next, we learn that said agreement was for six months. Then we are asked to consider that "after" the six-month agreement had expired, Respondent "attempted to alter the terms" of that agreement.

Ummm . . . lemme see if I got this.

The six-month 2014 Employment Agreement expired: as in the agreement's term had run its course and was no longer in effect. As in there was no "current" employment agreement after the 2014 Employment Agreement had died a natural death, right?

Given the above understanding, it doesn't seem to me that Respondent would have been "attempting to alter the terms of agreement," because those terms had ceased to exist upon the expiration of the document at issue. The parties may have been negotiating the terms of a "new" agreement but I don't think that it would be fair to depict the employer as trying to "alter" the terms of an agreement that had expired. Accordingly, I don't think that it makes sense to say that Claimant was "forced to resign" because Respondent "attempted to alter the terms" of an expired agreement. Claimant may have opted to resign because he could not negotiate a new employment agreement on terms satisfactory to him, and that outcome may be his fault, his former employer's fault, or a blend of both. Regardless of those uncertainties, if Ellis had earned commissions under the 2014 Employment Agreement when it was in force and in effect, then Rice Financial should have paid him. 

Computer and Blackberry

As best I can make out from the FINRA Arbitration Decision, Rice Financial wanted compensation for a computer and Blackberry that Ellis allegedly wrongfully retained after ending his employment. The price-tag attached by the firm to the used computer and used Blackberry phone was about $100,000 in compensatory damages and attorneys' fees. I would loooove to know the make and models of those two pieces of equipment!

Online Research

I started looking into the parties involved in this arbitration and did some online research about Rice Financial and Ellis and, boy, did my eyes pop open and my jaw drop. From the FINRA Arbitration Decision, we know virtually nothing about Claimant Rodney G. Ellis, and, no, I'm not criticizing that lack of disclosure because such background isn't always necessary. On the other hand, I was wondering if Claimant Ellis was a rookie stockbroker or first-year trader? Was he a short-term or long-term employee of Respondent Rice Financial?


According to FINRA's online BrokerCheck database effective October 4, 2016, Rice apparently entered the securities industry in 1988 and was first registered in 1989 with FINRA member firm Rice Financial Products Company, where he remained until October 2015, at which time he  became registered with FINRA member firm Bonwick Capital Partners, LLC, where he remained until June 2016. According to the BrokerCheck heading "Other Business Activities," Ellis appears to be a lawyer and a  "Texas State Senator." Beyond that, his online BrokerCheck record is clean as a whistle.


Texas State Senator? Okay, gotta admit, that piqued my interest, so I expanded my online research. According to the "Background" page at Ellis's website, he was elected to the Texas State Senate in 1990 and:

Before joining the Texas Senate, Senator Ellis served three terms on the Houston City Council, and as chief of staff to the late U.S. Congressman Mickey Leland. He holds a bachelor's degree from Texas Southern University, a master's degree from the Lyndon B. Johnson School of Public Affairs, and a law degree from the University of Texas School of Law. Senator Ellis also studied at Xavier University of New Orleans and the London School of Economics.

San Antonio Express-News Article

Some interesting details about Ellis are presented in "Houston senator's work raises questions of conflict of interests" (San Antonio Express-News, by James Drew, April 3, 2015):

[S]ince first being elected to the Texas Senate in 1990, Ellis has been involved directly or indirectly in municipal bond deals totaling $120 billion in Texas, a Hearst Newspapers analysis has found. Nearly all of those deals have involved several firms doing "underwriting" - when firms are chosen or bid to buy bonds from a government agency and then sell them to investors.
. . .
Ellis was a Houston city councilman in 1987 when he and two others opened a public finance firm, Apex Securities, Inc., in a field that Ellis referred to as "overwhelmingly white."

"There was a growing recognition in the public sector for leaders to insist that minorities and women be allowed to break into" the public finance profession, said Ellis.

But the firm's work generated controversy.

In 1993, state Rep. Ron Wilson, D-Houston, criticized Ellis for doing bond work for the city of Houston while trying to make sure city officials got legislative approval for a $500 million bond sale.

Ellis removed his firm from a city contract that had been awarded to help sell $119 million in certificates of obligation. The city was borrowing the money as it waited for the Legislature to pass a law enabling the bond sale to go forward.

In 1998, a New York financial services firm, Rice Financial Products, purchased Apex Securities. The terms weren't disclosed. After the sale, Ellis became a managing director of Rice Financial.
. . .
Four months after last year's legislative session ended, a New York investment firm, Bonwick Capital Partners, hired Ellis away from Rice Financial to expand into the competitive field of public finance. . .

Like I said in the introductory paragraph to this article: one thing tends to lead to another. What, at first blush, came off as a rather mundane employment dispute between a nondescript employee and his former firm, takes on added dimension when we realize that we were dealing with an employee who, in reality, is a Texas State Senator and was a former Managing Partner of the Respondent.  Once again, the underbelly of Wall Street gets exposed. When all is said and done, you have to wonder why an apparent behemoth such as Ellis and a brokerage firm with lucrative political connections such as Rice Financial would risk washing so much dirty laundry in public over a measly $25,000 or so in disputed commissions. 

Then again, watching the present presidential campaign unfold in all it tawdry glory, politics and Wall Street do deserve each other.