While Odds Are Against Financial Advisors in Promissory Note FINRA Arbitration Cases — Every Now and Then A Long Shot Hits

Although brokerage firms win the vast majority of their FINRA promissory note and employee forgivable loan (EFL) cases — often obtaining judgments for the outstanding loan balance, interest and attorney’s fees — every now and then the underdog advisor prevails.

In one such rare example, Merrill Lynch filed a FINRA arbitration promissory note claim against a former registered representative seeking to recoup approximately $266,000 outstanding on the note, in addition to almost $44,000 in interest and a little over $211,000 in attorney’s fees and costs. The registered representative denied the allegations, raised affirmative defenses and filed a counterclaim alleging fraudulent inducement and tortious interference with a business relationship. (Merrill Lynch v. James Eric Cooper, FINRA Arbitration No. 10-04787).

In a stunning defeat for Merrill Lynch, the Panel without explanation dismissed Merrill’s collection claim, including all the money it sought to recover. The Panel then proceeded to award Cooper, the broker, over $156,000 in attorney’s fees and costs, along with a recommendation to expunge his Form U-5 language and to have it replaced with a more favorable description.  Without a doubt a resounding victory for David against Goliath.

While this arbitration decision unfortunately does not provide the specifics of why the Panel did what it did (and most do not), I have found in my many years of representing advisors in promissory note cases that a strong counterclaim goes a long way in helping to favorably resolve the case. Moreover, a good paper trail contemporaneously created by the advisor evidencing and detailing the wrongful conduct of the brokerage firm, coupled with damaging firm internal documents obtained through aggressive discovery during the case, may substantially improve the advisor’s chances of negotiating a reasonable settlement, or being that long-shot about which we occasionally read in the papers.

If you are being sued by your former securities firm for payment on a promissory note, employee forgivable loan (EFL) or retention note, contact my law firm for a confidential, no cost consultation on the process, your legal rights and strategic options. Call David Chase, Esq. toll-free at: 800-760-0912 or e-mail at:

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