FINRA ordered Bank of America-Merrill Lynch to pay one of its former financial advisors about $1.5 million in compensatory damages and change his Form U5 last week – an unusual outcome for this type of dispute, says one legal expert. And, given the results, financial advisors (and broker-dealers) can learn a few lessons from this type of conflict.
“This case is interesting in that the respondent, or advisor in this case, actually got something,” said attorney Patrick Burns, who specializes in compliance topics, in an interview. “This is somewhat unusual and is over and above the norm in the world of arbitration.”
Reviewing such arbitration entails a fair amount of guess work, explains Burns, who is based in Beverly Hills, Calif. “There are no detailed reasons given for the result of the decision making,” he added.
Despite the speculation involved, the attorney noted, “One would assume that FINRA was quite unhappy with the other side [in this case Merrill] before rendering a judgment, proceedings or a combination of the two.”
Promises, Puerto Rico
The recent FINRA ruling came nearly two years after Merrill Lynch filed its claim against Angel E. Aquino, following his termination from the firm in Puerto Rico. He worked for Merrill in Puerto Rico for about three years, beginning in the fall of 2006. Merrill Lynch had requested nearly $970,000 for the promissory note and more than $500,000 for attorneys’ fees and other associated costs.
(Promissory notes are upfront forgivable loans offered to advisors being recruited by certain broker-dealers. They must be repaid if the advisor resigns or is fired before the loan is forgiven.)
Aquino filed a counterclaim, asking for more than $150 million related to lost commissions, earnings and other compensations; he later reduced the request to about $13 million in compensatory damages. The advisor, who now works in Miami for Morgan Stanley Smith Barney, also requested that his U5 termination record be corrected or expunged.
Before resolving the dispute, six pre-hearing sessions were held in San Juan, Puerto Rico, from February 2010 to April 2011, along with 19 hearing sessions from July 2010 to May 2011.