Whistleblower Law Blog

On July 23, 2008, an arbitration panel of the Financial Industry Regulatory Authority (FINRA) held, for what appears to be the first time, that when a brokerage house misrepresents why it terminates a regulated employee it is not immune from suit.  In his complaint, a broker alleges that his former employer, Commerce Capital Markets, Inc. (CCMI) misrepresented on his form U-5 the reason it terminated his employment.  CCMI is required to submit a U-5 to FINRA when it separates any FINRA-regulated employee.  CCMI moved to dismiss the broker’s defamation claim, arguing that it was immune from suit as any alleged defamatory statements it makes to FINRA on the U-5 are absolutely privileged.  In siding with the broker, the FINRA panel embraced the position of the sixteen states that have enacted Section 507 of the Uniform Securities Act and rejected the position of New York’s highest court articulated in Rosenberg v. Metlife Inc., 453 F3d 122 (2nd Cir. 2006).  The broker is represented by R. Scott Oswald and Adam A. Carter of The Employment Law Group® law firm.