The US District Court for the Western District of Texas should confirm an arbitration award for brokerage firm Citigroup Global Markets Holding Inc. (n/k/a/ Morgan Stanley Smith Barney, LLC) against a former employee who failed to pay his promissory note—so says magistrate judge Nancy Stein Nowak.
Nowak argued before the Texas court that even if “equitable reasons” exist for why stockbroker Ernest Elam shouldn’t pay the brokerage firm the money he owes for the promissory note, the arbitrator’s decision must still be upheld because the former Citigroup broker failed to provide a reason for why he shouldn’t pay that falls under the Federal Arbitration Act.
Last July, the arbitration panel found in favor of Smith Barney (Citigroup) and Elam was told to pay the investment firm $193,484.28, $15,768.70 in legal fees, and 5% interest per annum for any balance that is not paid. In turn, Elam asked for the award to be vacated because he claims that:
– The promissory note was a forgivable loan.
– He was misled about repayment requirements.
– Smith Barney sought repayment because the broker’s departure caused the branch manager’s end of the year bonus to go down.
– Smith Barney benefits financially from commissions through Elam ’s previous clients.
According to Nowak, Citigroup Global Markets Holdings Inc. and Citigroup Global Markets Inc. (as Smith Barney) had asked for confirmation of the award against Elam for the 2004 promissory note (forgivable loan) he defaulted on in the original principal amount of $270,878. The magistrate judge says that according to the FAA, an arbitration award can only be vacated if:
– The award was obtained through fraud, corruption, or undue measures.
– The arbitrators were at least partially corrupt or engaged in misconduct or went beyond the scope of their powers.
Therefore, Novak contends that the district court cannot vacate the award and should grant Smith Barney’s motion.
If you have questions about a forgivable loan that you entered into, The White Law Group may be able to help. To speak to a securities attorney, please call our Chicago office at 312-238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit https://whitesecuritieslaw.com.Tags: broker fraud, FINRA, Forgivable Loan, investment losses, investor protection, law firm, Morgan Stanley, NASD, Promissory Note, SEC, securities arbitration, Securities Attorney, Securities Lawyer, Smith Barney, Texas Last modified: December 5, 2022