New York Securities Lawyer Blog
On February 5, 2016, a Financial Industry Regulatory Authority (“FINRA”) panel of arbitrators (the “Panel) rendered an Award (the “Award”) against the Royal Bank of Scotland’s United States securities divisions, RBS Securities, Inc. (“RBS”), on behalf of the Claimant Jeffrey Howard (“Howard”). The Panel determined that RBS’ termination of Howard’s employment for cause and subsequent use of defamatory language on his Form U-5 was actually an attempt to conceal “significant internal turmoil” within RBS. As a result of the language, Howard was unable to find employment.
According to statements made to the New York Times, Howard’s career was on an upwards trajectory when he joined RBS as the Head of Prime Services for the Americas in 2012. Prime Services is a line of business in which banks offer a “package of trading, settlement and cash management products to hedge funds and other big trading firms.” By 2014, Howard had become the Global Head of Prime Services. However, in August 2014, Howard was suddenly terminated from his employment.
Howard filed a Statement of Claim in November 2014 asserting the following causes of action: breach of contract; defamation per se; fraud in the inducement; and declaratory judgment. As such, Howard sought $10 million in compensatory damages. In their Answer filed in January 2015, RBS denied Howard’s allegations and made various affirmative defenses.
The Panel found RBS liable for $2,054,527.29 in compensatory damages, and ordered RBS to “send a formal letter that retracts any prior notice it gave that Jeffrey Howard was terminated for cause and/or violated any [RBS] Human Resource Policies … to each and every person and/or entity to which it provided such prior notice.” The Panel also recommended the expungement of Howard’s Form U-5 based on the defamatory content therein, and recommended that the language be replaced by the word, “Redundancy”.
According to the Award, “there was an inadequate, unfair, and inappropriate foundation for the conclusions and decisions reached by the persons who determined that Claimant violated the Policies and should be terminated for cause, including, but not limited to, fundamental errors and inconsistencies in the interpretation and application of the Policies, the facts relied upon, and the rationale utilized.”
The New York Times reporter noted that, “[r]egulators are broadening their scrutiny beyond aggressive sales tactics to the training and supervision of employees and managers and how firms find and monitor employee subcultures that act in contradictory ways to firm policies.” Firms’ subcultures warrant investigation as those firms’ policies could have a significantly prejudicial effect on the employees’ rights and careers.
Lax & Neville LLP has nationally represented small broker-dealers, financial services professionals, and securities industry companies in regulatory matters and securities-related and commercial litigation. Please contact our team of attorneys for a consultation at (212) 696-1999.