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Holding securities firms accountable in financial adviser disputes

On Behalf of | Apr 18, 2022 | FINRA, Firm News, Securities Law And Litigation |

Disputes between financial advisers and their employers are often complex. Broker-dealer and registered investment adviser (RIA) firms often entice financial advisers to join their organizations through sign-on bonuses and opportunities for higher earnings.

That’s especially true for advisers who bring high-value clients with them. But often, these compelling promises of “upfront money” turn out to be less than genuine. In some cases, signing bonuses become promissory notes, which advisers must repay if they leave the company before a specific date.

Various conflicts can arise between advisers and dealers

A financial adviser’s reputation and well-being are at stake when they leave RIAs and broker-dealer firms due to conflict. But advisers can hold employers accountable by filing claims over unfair or illegal treatment involving:

  • Signing bonuses
  • Repaying promissory notes
  • Recruitment tactics
  • Employment contracts
  • Compliance issues
  • Alleged violations of FINRA rules
  • Misleading or false statements on U5 forms

These claims are intricate and are usually resolved through arbitration, negotiation or litigation.

Valenti Hanley client wins arbitration award

When registered financial advisers leave a securities firm, the reason must be reported to the Financial Industry Regulatory Authority (FINRA) and other self-regulatory agencies. Potential employers and investors can access information on why an adviser was terminated.

When firms present false or misleading information, careers are on the line. That was the case when J.P. Morgan fired an adviser with a spotless record. The firm said it was because he asked a coworker to notarize a client’s document without the client being present, violating securities laws.

Attorney Michael Valenti of Valenti Hanley PLLC represented Dustin Luckett, and after several hearings, arbitrators ruled unanimously in Luckett’s favor restoring his reputation and awarding him over $1 million in damages for defamation. The panel said the incident amounted to nothing more than an honest clerical error.

This case illustrates the power that major securities firms hold over the careers of countless financial advisers and that they can be held accountable for false or misleading actions that jeopardize their employees’ livelihoods.

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