09
April
2011

DAMAGES AWARDED BY FINRA PANEL FOR FAILING TO JOIN THE PROTOCOL

If joining the Protocol will effectively transition a broker to a new employer without the fear or cost of litigation, can the new employer be held liable for failing to do so when its recruits are sued by their old employer? Maybe so. In an arbitration award issued in July, 2010, a FINRA panel sitting in Indianapolis ordered a broker-dealer to pay 2 million dollars to a pair of brokers it hired from Merrill Lynch for damages sustained in what appeared to be a botched transition.

The award indicates that the claim was filed by NRP Financial, Inc., for recovery of sums due on promissory notes and stock purchase agreements. The brokers filed a counter-claim seeking 21 million dollars in damages allegedly sustained as a result of their transition from Merrill Lynch to NRP. Specifically, they alleged that NRP falsely represented that it was a Protocol member and prematurely announced the brokers’ move to NRP. According to the brokers, upon learning of their impending departure, Merrill Lynch promptly fired them and obtained injunctive relief that prevented contact with their clients for five further months, effectively decimating their book of business.

The FINRA panel ultimately awarded 2 million dollars to the brokers and dismissed the claims for recovery on the promissory notes and stock purchase agreements. Of this amount, nearly $500,000 was awarded for attorney’s fees, costs and expenses. The case illustrates the sums at stake in securities recruiting cases. If properly executed under the Protocol, the transition probably would have occurred without litigation and the brokers would have had the opportunity to contact their clients and solicit their business following their resignation from Merrill Lynch.

Author; Dennis J. Concilla

About the Author

Dennis J. Concilla

Dennis J. Concilla

"It's important that I know my client's business as well as they do."

Dennis Concilla practices securities law at Carlile Patchen & Murphy LLP, where he heads the firm's Securities Litigation and Regulation Practice Group. His focus is in the area of securities industry employment arbitration and regulation. Dennis joined CPM in April, 1985. He has been listed in Best Lawyers in America® for several years and The Securities Law Practice Group recently received a top tier ranking from Best Lawyers in America®.

PROFESSIONAL EXPERIENCE
Dennis served as Legal Counsel to the Ohio Senate Majority, was District Director of the 12th Ohio Congressional District, and is a former Assistant Attorney General for Ohio. Dennis served as an arbitrator for the National Association of Securities Dealers and has appeared before FINRA, its predecessors, the NASD and New York Stock Exchange, the Commodities and Futures Trading Commission, the Securities and Exchange Commission, and the Ohio Division of Securities.

PUBLICATIONS AND SPEAKING ENGAGEMENTS
Dennis has spoken at NASD sponsored arbitrator training seminars throughout the Eastern United States and has been a presenter at the Ohio Division of Securities annual conference. Dennis has been featured as a securities litigation instructor for Continuing Legal Education seminars sponsored by the Columbus, Cleveland and Ohio State Bar Associations and has been a speaker at CLE seminars on Restrictive Covenants & Ohio Administrative proceedings.

PROFESSIONAL ASSOCIATIONS AND MEMBERSHIPS
Dennis is a member of the Securities Industry and Financial Markets Association, Compliance and Law Division, and the Ohio State, and Columbus Bar Associations.