Securities Industry Employment Litigation
Employment claims brought by securities industry participants involve issues unique to the securities industry. Having represented broker-dealers and registered representatives, we have substantial experience with both sides of these disputes and have prosecuted or defended claims for Form U5 expungement, unpaid deferred compensation (including Restricted Stock Units), enforcement of employee forgivable loans (EFL), broker-dealer raiding, unpaid bonuses or commissions, and wrongful termination. We have developed a reputation for effective advocacy by aggressively advancing our clients' interests from the outset of each case.
Employee Forgivable Loan Cases
Over the past five years, Robert Herskovits has successfully prosecuted a significant number of EFL cases brought on behalf of large broker-dealers, such as Morgan Stanley Smith Barney LLC and Jefferies & Company, Inc., and smaller broker-dealers. As a small law firm, we remain free from many of the conflicts associated with larger firms, and have defended a multitude of EFL cases brought by various broker-dealers. When defending an EFL case, we structure a defense designed to achieve a resolution with a significant discount to the Note's unpaid balance
Form U5 Expungement
Within 30 days after termination of a registered employee’s employment, a member firm must complete and submit a Form U5 to FINRA and give a copy to the employee. The employer is required to disclose the reasons for the termination on the Form U5, and failure to do so will result in a penalty. When the employer discloses a termination for a sales practice violation, FINRA typically opens an investigation and seeks responsive information from the registered employee. Negative disclosure on a Form U5 may also impair the employment prospects for a registered person.
We have represented numerous registered employees in connection with FINRA investigations stemming from a Form U5 disclosure. We have also represented numerous employees in FINRA arbitrations in which the employee demands the removal or modification of the Form U5 disclosure.
Although Form U5 disclosure is protected from defamation claims in New York, this is a state-specific issue which varies depending upon the laws of the state in which the registered person was employed.
Raiding is a term used to describe the hiring of producers in a definable business unit of one firm by a competing firm. Although the Protocol for Broker Recruiting was designed to decrease litigation occasioned by departing producers, litigation often ensues if one broker-dealer acts in a predatory fashion and causes producers to leave another broker-dealer en-masse.
We have litigated both sides of raiding claims. In a recent arbitration, we successfully advanced a "life boat" defense by demonstrating that the producers were intent on leaving and the hiring firm acted without malice.