Arbitration Panel Finds Merrill Lynch Defamed Former Employee

Merrill Lynch, Pierce, Fenner & Smith, Inc., a brokerage firm registered with Financial Industry Regulatory Authority (“FINRA”) and investment adviser firm registered with Securities Exchange Commission (“SEC”), as well as Merrill Lynch International Finance, Inc. (collectively, the “firms”), have been ordered by an Arbitration Panel to pay former employee, Miguel Andres Ballestas, $750,000.00 in compensatory damages based upon the firms having been found liable for defamation on FINRA Form U5 relating to the circumstances of Ballestas’ termination. (FINRA Office of Dispute Resolution Arbitration Award No. 14-01946, April 30, 2018).

According to the Arbitration Award, the firms brought an arbitration against Ballestas alleging unjust enrichment and breach of contract, contending that Ballestas failed to pay a promissory note executed on January 9, 2009. Ballestas counterclaimed, alleging that the firms, inter alia: breached duties of good fair and fair dealing; violated FINRA Rule 2010; wrongfully terminated Ballestas; breached fiduciary and contractual duties owed to Ballestas; and committed Central Registration Depository (“CRD”) Form U5 defamation pertaining to Ballestas’ termination from the firms.

In the “Termination Disclosure” section of the Form U5, the firms were apparently asked if Ballestas voluntarily resigned from the firms, or had been discharged or permitted to resign from the firms, after allegations were made that accused Ballestas of: (1) violating investment-related statutes, regulations, rules or industry standards of conduct; and/or (2) fraud or the wrongful taking of property. Evidently, those questions were answered by the firms in the affirmative.

The Arbitration Award revealed that the firms collectively sought: $407,451.40, which reflected the outstanding promissory note balance, as well as interest, costs and attorneys’ fees; and for Ballestas’ counterclaim to be completely dismissed. However, Ballestas sought a total of $26,000,000.00 in damages from the firms based upon the loss of Ballestas’ book of business, pension, and deferred compensation, and for having suffered from mental pain and anguish by the firms. Moreover, Ballestas sought for his promissory note to be cancelled or at least offset by service payments pertaining to his employment with those firms, and for his CRD Form U5 to be expunged. Evidently, on June 27, 2017, FINRA Office of Dispute Resolution was provided a notice of settlement regarding a portion of the claims made by the firms and Ballestas against each other.

After having considered the evidence, testimony and pleadings, the Arbitration Panel concluded that the firms were jointly and severally liable for CRD Form U5 defamation of Ballestas, and ordered the firms to pay Ballestas $750,000.00 in compensatory damages. Further, the Arbitration Panel recommended that the firms’ answers in the “Termination Disclosure” section of Form U5 be changed to “No” based on the firm’s initial responses being of a defamatory nature.

Cosgrove Law Group, LLC has represented former employees in several U5 defamation cases nationwide, helping them obtain settlements and awards ranging from $100,000.00 to $3,500,000.00. If you feel that you have been a victim to U5 defamation, call Cosgrove Law Group and speak to our experienced counsel today.