FINRA U5 CRD Expungement: We Have Two Winners!!

What's the point? Why should I even waste my time and money? Isn't the FINRA Arbitration process stacked against the individual RR? -- So goes what passes for common wisdom.  As with so much industry lore, it ain't always right and if you invest too much credibility in such water-cooler lawyering, you may regret it.

Without question, it's tough for an individual RR to prevail in any FINRA Arbitration, be that a customer or intra-industry dispute.  However, "tough" doesn't mean impossible and sometimes you just have to suck it up, put your head down, and be prepared to run through walls in order to preserve your rights and reputation. 

Consider these two recent expungement cases brought by two lowly brokers -- one against a household name (Merrill Lynch) and the other against one of the industry's smaller players.  The Merrill case reached for a $100 million moon; the other stooped for the relatively small change of $100.  However, don't be mislead by the monetary damages that the Claimants sought.  The more valuable prize here -- their reputations -- were at stake, and if the holy grail of a Form U5 expungement was the goal, then both registered representatives won.

Seeks $100 Million in Damages -- Gets $25,000 and A Valuable Expungement

In the Matter of the Arbitration Between Claudia S. Srour, Claimant, vs. Merrill Lynch Pierce Fenner & Smith, Inc. (Respondent) and Merrill Lynch & Co., Inc. (Respondent) (FINRA Arbitration 08-04211, March 24, 2010), Claimant Srour asserted abusive discharge and breach of contract.

On May 20, 2008, amended on June 12, 2008, and amended again on July 23, 2008, Claimant Srour's Form U5 as filed by Respondent Merrill Lynch Pierce Fenner & Smith, Inc. (Respondent MLPFS) stated in the "Termination Comment" section:

MS. SROUR'S EMPLOYMENT WAS TERMINATED ON ON MAY 6, 2008, FOR FAILING TO COOPERATE IN AN INTERNAL INVESTIGATION AND RELATED LITIGATION WITH CLIENTS, PROVIDING INCORRECT INFORMATION TO OFFICE MANAGEMENT CONCERNING VALUE OF ASSETS AVAILABLE TO SECURE OUTSTANDING POSITIONS IN THE CLIENTS' ACCOUNTS, AND EXPOSING THE FIRM TO RISKS AND LOSSES IN THE ACCOUNTS 

Claimant Srour requested $24,306,863.00 in compensatory damages, $72,920,590.00 in punitive damages, plus interest, attorneys' fees, costs, disbursements, and an expungement of her Form U5. 

Respondent Merrill Lynch & Co., Inc. is not a member or associated person of FINRA and did not voluntarily submit to arbitration, and, as such, the Panel made no determination as to claims against that entity.  Respondent MLFPS sought dismissal of the claims. 

The Panel found Respondent MLFPS liable for $25,000 in compensatory damages for what was described as "indemnity loss." 

The Panel recommended that the reason for discharge on the U5 remain as "Discharged" but ruled in favor of the partial expungement of Srour's U5 in the form of the deletion of the following language:

MS. SROUR'S EMPLOYMENT WAS TERMINATED ON ON MAY 6, 2008, FOR FAILING TO COOPERATE IN AN INTERNAL INVESTIGATION AND RELATED LITIGATION WITH CLIENTS,[.] PROVIDING INCORRECT INFORMATION TO OFFICE MANAGEMENT CONCERNING VALUE OF ASSETS AVAILABLE TO SECURE OUTSTANDING POSITIONS IN THE CLIENTS' ACCOUNTS, AND EXPOSING  THE FIRM TO RISKS AND LOSSES IN THE ACCOUNTS

In explaining the basis for its Expungement Order, the Panel noted that  

This recommendation is based upon substantial evidence submitted by Claimant.  The information is factually impossible or clearly erroneous.

 

This recommendation is made with the understanding that Claimant Claudia S.Srour must obtain confirmation from a court of competent jurisdiction before the CRD will execute the expungement directive. The Form U5 is not automatically amended to include the changes indicated above. Respondent Claudia S. Srour must forward a copy of this Award to  FINRA's Registration and Disclosure Department for the amendment to be incorporated into the Form U5. 

 

Seeks $100 and Gets It -- Plus The Valuable Expungement

In the Matter of the Arbitration Between Rohinton B. Bulsara, Claimant, vs. First Asian Securities Corporation, Respondent (FINRA Arbitration # 09-05199, March 24, 2010), Claimant Bulsara appeared pro se and Respondent First Asian Securities Corporation (Respondent FASC) did not enter an appearance.  Claimant Bulsara apparently sought only $100 damages and an expungement of Form U5.

The sole FINRA Arbitrator hearing the case awarded $100 in compensatory damages as against Respondent FASC.  

The Arbitrator recommended the expungement of Claimant Bulsara's Form U5.  Specifically, the Arbitrator ruled that the listed" Reason for Termination" of "Discharged" be amended to "Voluntary."  The Arbitrator further ruled that commentary: "DIS; FAILED TO COMPLY W/SEC & NASD REGULATIONS" be expunged in its entirety.

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