BD to Pay $1 Million Fine for Requiring Employees to Waive Arbitration
FINRA fined a large broker-dealer $1 Million for requiring employees to waive FINRA arbitration in promissory notes used as part of a bonus program. The firm used a non broker-dealer affiliate to pay retention bonuses structured as promissory notes. The notes required employees to waive arbitration so that any defenses to payment could only be brought in a New York State court, which, according to FINRA, “greatly limits the ability of defendants to assert counterclaims in such actions.” FINRA alleges that the practice violated FINRA rules requiring firms to arbitrate disputes with employees. Over 5,000 reps signed the notes, representing $2.8 Billion in retention bonuses.