Firm Fined for Bypassing FINRA Arbitration Requirements

A firm settled FINRA charges for improperly pursuing state court litigation in disputes involving former associated persons and their new employer, rather than pursuing arbitration, as required by the FINRA Rules.

According to the AWC, the firm filed lawsuits in Missouri and Kansas state courts in matters concerning confidentiality and non-solicitation agreements with former associated persons. The Kansas court ultimately stayed the litigation pending arbitration and the firm eventually went to arbitration.

FINRA found that the firm's non-compliance with these arbitration obligations led to prolonged litigation costs, totaling approximately $800,000 for the other member firm involved.

FINRA determined that the firm's actions violated FINRA Rules 13200(a) ("Required Arbitration"), 13804(a) ("Temporary Injunctive Orders; Requests for Permanent Injunctive Relief") and 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the firm agreed to (i) a censure and (ii) pay a $75,000 fine.