William P. Peterson, a former independent contractor affiliated with Great Pacific Securities (“GPS”) commenced an arbitration before the Financial Industry Regulator Authority, Inc. (“FINRA”) against GPS, alleging that GPS wrongfully terminated him and requested expungement of his Form U-5. GPS primarily conducts business with institutional investors, however permits its brokers and independent contractors to maintain family and friends retail investment accounts. After March 2011, Peterson no longer had any institutional investor customer accounts, and only maintained a book of business consisting of his family and friends’ retail investor accounts. According to the FINRA arbitration award, the Chief Executive Officer (“CEO”) of GPS, David Thomas Swoish, informed Peterson that FINRA was “cracking down on the ‘parking’ of inactive registrations and indicated that he was inclined to take some action,” against Peterson because he had no institutional clients since March 2011. See Award, William Poulis Peterson vs. Great Pacific Securities, Debasish Banerjee, Michele M. Cromer, David Alvin Swoish, and Christopher Vincent Vinck – FINRA Dispute Resolution No. 12-01785, dated March 12, 2013. In response, Peterson requested 90 days to look for a position at a retail firm before GPS terminated him and marked his Form U-5. A Form U-5 is the Uniform Termination Notice for Securities Industry Registration, and must be used by broker-dealers to terminate the registration of an associated person from association with a particular broker-dealer or investment firm, and filed with self-regulatory organizations, including FINRA. GPS, however, terminated Peterson on December 31, 2011 and marked his Form U-5 to represent that his termination was “voluntary.” In the FINRA arbitration, Peterson claimed that he was wrongfully terminated and that his Form U-5 contained an error as it designated his termination as “voluntary,” when it was not. The sole FINRA arbitrator presiding over the matter held that although Peterson’s termination as not voluntary, there was “no evidence whatsoever that [Peterson] suffered any injury based upon the wording of the [Form U-5] because it was more benign than a terse statement that [GPS] invoked its right to terminate its contract with [Peterson].” Thus, the FINRA arbitrator denied Peterson’s request for expungement and concluded that, “it does not appear that expungement would be of any benefit.” Seemingly, the arbitrator’s decision to deny Peterson’s request for expungement was contrary to FINRA’s requirement that any and all language on Form U-5s be true and accurate.
Lax & Neville LLP has represented individuals, securities industry employees, financial services professionals and securities industry companies nationwide in employment matters and securities-related and commercial litigation, including loan default cases and Form U-5 expungement matters. Please contact our team of attorneys for a consultation at (212) 696-1999.