FINRA Industry Disputes

Iorio Altamirano LLP represents financial advisors in employment disputes against brokerage firms. Our knowledge and understanding of the securities industry allow us to provide effective representation to financial services professionals in intra-industry disputes.

Our firm has experience advising financial advisors in the following areas:

• Breach of Contract: Depending on the terms of the agreement between the financial advisor and the brokerage firm, a breach of contract claim may involve issues related to the payment of bonuses, commissions, and other compensation.

• U-4 and U-5 Defamation and Expungements: Brokerage firms have been known to report false, misleading, or defamatory information on a departing advisor’s disclosures. This is wrong. Financial advisors rely on their reputation and record for continued employment opportunities. Our firm zealously fights the misuse of U-5 disclosures to damage a financial advisor’s reputation and will seek the expungement of such disclosures. Our firm can also negotiate disclosure language with brokerage firms prior to filing.

• Promissory Notes: Broker compensation may be tied to promissory notes. If a financial advisor is fired or moving firms, it is common for brokerage firms to try to recover promissory note balances related to forgivable employee loans, recruiting bonuses, or up-front bonuses. Our firm reviews the specific facts of the case to determine whether there are any mitigating circumstances.

• Misrepresentation and Fraudulent Inducement: A financial advisor may have been induced to leave their old firm based on certain promises and representations which the new firm knew were false. The results can be financially devastating for the broker, who, but for the firm’s broken promises, either would not have switched firms or would have reached their production goals.

• Discrimination: Discrimination disputes involve age, disability, gender, national origin, race, religion, or sexual identity. Under FINRA rules, a claim alleging employment discrimination is not required to be arbitrated under the Code of Arbitration Procedure for Industry Disputes. Instead, the claim may be arbitrated only if the parties agreed to arbitrate it, either before or after the dispute arose.

• Wrongful Termination: The cause of action is often based on a brokerage firm providing a false reason for the financial advisor’s discharge. In the past, FINRA arbitration panels have given awards to financial advisors who have been wrongfully discharged. Our firm has experience taking cases to the trial stage.

• Severance Agreements: We assist financial advisors by reviewing the terms of their severance agreements and provide guidance based on industry standards. Our firm will also negotiate the severance terms on the advisor’s behalf.

• Transitions: Firms regularly seek to protect their relationships through post-employment restrictive covenants, including non-solicitation, non-compete, or garden leave provisions in employment agreements. FINRA rules and the Protocol for Broker Recruiting limit the ability of broker-dealers to prevent departing financial advisors from servicing their former clients. We help financial advisors in all areas of the transition process.

Firms entering into non-compete agreements must comply with FINRA Rule 2140, FINRA Rule 11870, and the Protocol for Broker Recruiting if the firm is a signatory to it.

FINRA Rule 2140 prohibits the interference with a customer’s request to transfer an account in connection with a representative’s change in employment where there is no existing dispute with the customer about the account.

Additionally, under FINRA Rule 11870, FINRA-registered agents must help transfer a customer’s account if the customer chooses to follow a registered representative to another broker-dealer. Employers must be careful to avoid restrictions on employees that interfere with a customer’s rights.

The Protocol for Broker Recruiting limits the restrictions a signatory firm can place on registered representatives who move to another signatory firm. Approximately 1,700 broker-dealers are signatories to the Protocol. The Protocol’s principal goal is “to further the clients’ interests of privacy and freedom of choice” regarding the movement of brokers between firms.

Under the Protocol, a departing employee may take certain information regarding clients they serviced while at the firm to a new employer and use that information to solicit clients. This information is limited to client name, client phone number, client email address, and account title.

Further, both the departing employee and the new employer have no monetary or other liability if the departing employee both leaves one signatory firm to join another signatory firm and follows the procedures in the Protocol.

Iorio Altamirano LLP is a securities law firm based in New York, NY. Contact us for a free and confidential evaluation of your situation.