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Brokerage Companies Avoiding FINRA for Other Dispute Resolution Options

Thursday, September, 3, 2015

FINRA arbitration is in place to help brokerage firms resolve issues related to employment disputes and other activity, but some firms have successfully avoided FINRA hearings in recent months. This is despite FINRA rules to the contrary.


Evidence shows that recently, firms have managed to persuade courts to uphold provisions in contracts to arbitrate at the American Arbitration Association (AAA), a private forum, as opposed to FINRA.


The most recent issue occurred when a Texas federal court ruled that an advisor must pay a deferred-pay claim against First Command Financial Services before the AAA. The US district judge said that First Command Financial Services is not a broker-dealer and is not subject to FINRA rules requiring arbitration of employment disputes. Simultaneously, and acting as a broker-dealer, First Command is pursuing a separate but related non-compete case in a FINRA forum.


There is also a similar case in South Carolina concerning Ameriprise Financial. The company is withholding incentive stock from two company reps that were at one time employees, but have since moved onto another firm.


Both men had been given the incentive stock when they agreed to stay through the transition when Ameriprise bought their former employer. The reps were promised stock only if they remained with the company and both left early last year. Ameriprise filed at the AAA requesting the stock be returned. Ameriprise Financial is not a FINRA member, but the brokers are requesting the case be moved to FINRA. A federal court denied a request to stay the AAA proceedings.