FINRA Arbitrator Recommends Expungement after Merrill’s U5 Notice Shows ‘Reckless Disregard for the Truth’

A FINRA arbitrator has ruled in favor of a former broker in a claim against Merrill Lynch over her termination, according to a FINRA award cited by Financial Advisor IQ today.

The broker, who had worked for Merrill from 2004 to 2010 and again from 2015 to 2018 had been in the financial services industry for 26 years, according to her BrokerCheck profile. Merrill Lynch reportedly discharged the broker in August 2018 for allegations of “conduct involving improperly seeking to obtain compensation by opening a Bank of America savings account on behalf of a client without the client’s authorization,” according to her BrokerCheck report.

In February 2020, the broker reportedly filed a FINRA claim against Merrill Lynch for expungement of the termination statement on her Form U5 termination notice. She alleged in the claim that the statement was defamatory, according to a FINRA award posted last week. The broker was also reportedly seeking $50,000 in compensatory damages, according to FINRA.

The FINRA arbitrator said that Merrill Lynch’s failure to interview the client in question showed that its termination notice for the broker “demonstrates reckless disregard for the truth,” according to the article, citing the award.

The arbitrator also found that there was no claim that the broker had misappropriated funds from the client’s account, that she only earned $700 for opening it and that she had not been able to find a new job with a bank after her discharge after applying to several of them, despite her experience in the industry.

The arbitrator recommended that the broker’s U5 record should be expunged, the reason for termination changed to “Permitted to Resign,” and the language in the termination explanation changed to the following: “The Associated Person was permitted to resign because the savings account opened at Bank of America by her on behalf of a client was based on the client’s authorization,” the self-regulator says.

Merrill Lynch was also ordered to pay the broker $50,000 in compensatory damages, as well as an additional $150 to reimburse her for the non-refundable portion of her FINRA dispute resolution filing fee, according to the award.

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