Registered Rep. Magazine: Bill Singer's August

August 12, 2010


FINRA Arbitration: Sometimes It Pays To Settle

Within weeks of your departure from your former brokerage firm, the first of what are typically three letters arrives. It's sort of friendly and all. "Sorry that you left. You may recall that we gave you a $140,000 Employee Forgivable Loan (‘EFL') secured by seven years of promissory notes. You left after only five and one-half years. You didn't make it to the sixth anniversary. You owe us a two-year refund in the amount of $40,000."

You think that you should at least get full credit for the partial sixth year of service, and, at most, owe your former employer $20,000. Of course, you're still fuming at having to pack up and leave. You blame that on lousy management. So you toss the letter into the garbage.

The next letter is less friendly. Perhaps you didn't understand? "You owe us $40,000, plus interest that is now adding up since the date you left. If we go to court, we will seek attorneys' fees. You better call us or send a check within ten days or we're going to pursue our legal remedies." Again, you shoot a three-pointer into the garbage can.

The third letter is so hot and nasty that it arrives smoking. "You have ten days to pay us in full or we are filing a FINRA arbitration Statement of Claim against you. And, by the way, we may go into court to get a restraining order against you and your current firm because we think you violated your Non-Solicitation Agreement."