Brokers Win $14 Million Arbitration Award

Merrill Lynch lost a $14 million arbitration in which the firm was found to have defamed three of its brokers, causing economic and other injury, by making public in an industry filing (and elsewhere) the ostensible reasons for their termination of employment by Merrill. Merrill stated in defense of its actions that such reporting is in “the best interests of investors, who deserve clear explanations as to why a financial advisor was terminated” (as reported in the Wall Street Journal on January 6, 2006). As it turns out, the termination of employment in this case was wrongful, according to the arbitrators. Nevertheless, investors have a right to access full and accurate information about their brokers.

Securities Arbitration: The Broker’s Background Is Essential Information

At issue is the National Association of Securities Dealers’ CRD® (Central Registration Depository) report on the employment background and regulatory history of industry registrants. As stated on the NASD website, this “central licensing and registration system for the U.S. securities industry and its regulators. . .contains the registration records of more than 6,800 registered broker-dealers and the qualification, employment, and disclosure histories of more than 660,000 active registered individuals. . . .” The CRD, as it is commonly known, is important to investors because in its complete format it lists reportable events of regulatory actions and customer complaints against a broker.

Where the reason for termination supplied by the broker-dealer is accurate investors have the right to know, to help them make an informed decision when choosing a broker before a dispute arises.