Two Citigroup FINRA Arbitrations. Another Arbitration with an Odd Settlement -- or was there one?

April 12, 2010




When advisors lose their jobs but decide to keep loans or other payments from their former employers, expensive legal trouble can follow. The issue is how much, if any, of the money they received when they first joined the company is cash they are entitled to keep when they depart. Read Bill Singer's April  2010 Street Legal  column at Registered Rep. magazine to learn about two very different outcomes involvings Citigroup.


In the Matter of the Arbitration Between Robert Stephen Willoughby, Claimant, versus Weatherly Securities Corp., Respondent (FINRA 09-03378, March 31, 2010) Claimant Willoughby asserted Tortious Interference With Business Expectancy, Breach Of Contract, And Defamation on his Form U5. Among his demands for relief, Claimant sought $5,000.00 in compensatory damages, attorneys' fees, and expungement from his CRD record of allegations of an unauthorized trade and the basis for termination as an alleged sales practice violation.  Respondent did not enter an appearance.


No Show - No Surprise


Generally, in cases where one party doesn't show up or even submit a reply, that case isn't likely to come out well for the missing litigant.  Willoughby offers no surprises in that regard. The FINRA Arbitrator hearing this uncontested matter awarded $5,000 in compensatory damages to Claimant and $175 in costs.


Out, Out Damn Spot!


The Arbitrator further recommended the exupungement from Claimant's CRD records of all reference to a claim of an unauthorized trade on February 14, 2000 (complaint received on March 20, 2000), with the understanding that the process detailed in Notice to Members 04-16 must be filed to obtain confirmation from a court of competent jurisdiction.


Pursuant to Rule 13805, the Arbitrator determined that the unauthorized trading claim was false and factually impossible.  That ruling was based upon evidence that the trade set forth in the customer complaint was, in fact, authorized.  In reaching that conclusion, not only did the Arbitrator consider the testimony offered but also an NASD "No Action" letter dated August 4, 2000, concerning the customer complaint. 


In discharging her duties, the Arbitrator attempted to review a copy of the settlement agreement between the complaining customer and Respondent.  As best as I can infer, the missing Respondent member firm did not provide such an agreement and it appears that no such agreement existed.  Pursuant to Claimant's sworn Affidavit of March 24, 2010, we are advised that


[N]o formal settlement was ever made, the broker dealer simply reversed the trade in question with a trade cancellation, and moved it on to their omnibus account where they sold the shares and then billed it against my commissions.


Although the Arbitrator declined to order that the "Reason for Termination: Discharged" be amended, she did order the expungement of the following language (which provided an explanation for the basis of termination) on Claimant's Form U5 as filed by Respondent on April 20, 2000:




The Arbitrator further ordered that the expunged explanation be replaced with the following:

Trade canceled. Customer allegation of unauthorized trade found to be without merit.


Compliments to sole Arbitrator Lisa G. Hunter for a concise and effective decision.