A multiyear FINRA arbitration dispute between independent broker/dealer National Securities and the former owner of a branch office who claimed he’d been unfairly terminated ended recently with the branch owner receiving a measly award. The dispute played out in two separate arbitrations; the branch owner sought $10 million in his claim but was awarded just $175,000; under National Securities’ counterclaim, he was forced to pay $173,000 in money he owed the firm, netting him just over $2,000.
According to the statement of claim filed by Gerald Sharpe on Dec. 13, 2016, his Red Bank, N.J.-based branch was one of the premier National Securities branches in the country, consisting of 28 registered representatives with $339 million in assets under management. Sharpe claimed that he had been communicating with supervisors about renegotiating his agreement with the firm and was considering leaving National Securities altogether if a new agreement could not be reached. Sharpe could not be immediately reached for comment.
Sharpe claimed that he was told on July 13, 2016, that he might be fired because of a purported “cold-calling” violation committed by a representative at his branch, though he argued his supervisors were planning to fire him for weeks before this. Two days later, he wrote that a group from National Securities allegedly arrived at his branch in an attempt to damage his relationships with the brokers there to keep them at National Securities after Sharpe was fired. This kind of poaching, he argued, also violated his agreement with the firm. In the end, 13 of the 28 brokers at his branch transferred to other National Securities branches, according to his statement. Richard Roth, an attorney who represented National Securities in arbitration, said that while firm supervisors did visit the branch, they did not solicit brokers.
National Securities argued that Sharpe’s claims couldn’t be further from the truth in their response submitted to FINRA. National Securities was involved in a class-action suit filed by Philip Charvat in the U.S. District Court for the Southern District of Ohio in 2014, who’d asserted that National brokers had called him despite the fact that he was on the national “Do Not Call Registry,” as well as the firm’s own “Do Not Call” list.
But on June 20, 2016, a registered representative from Sharpe’s branch allegedly called Charvat, in the midst of the class-action suit proceedings, and Charvat allegedly recorded the conversations.
According to arbitration documents, National suspended the representative and started an investigation, allegedly learning that a representative at the branch knew a way to circumvent TeleBlock, the nationally recognized system that prevents individuals on the “Do Not Call” list from being called. Additionally, they found that many calls made from Sharpe’s branch did not ever pass through the TeleBlock system. National Securities also alleged numerous other FINRA violations, though Roth would not comment further. A spokesperson for National said that it was not company policy to comment on litigation, but they were "pleased with the result."
Sharpe argued that the representative who made the call to Charvat was directly supervised by another individual. In his statement of claims, Sharpe argued his branch actually had systems in place to prevent people on the “Do Not Call” list from being contacted, unlike at least three other National Securities branches. He asked that FINRA expunge the incident from his Form U5, claiming it had caused him “unnecessary, irreparable and continuing harm.” Sharpe currently is a branch manager at Aegis Capital's Red Bank office.
FINRA denied the expungement request, and doled out awards to both parties. Roth argued that FINRA’s decision “sent a very clear message on the strength and meaning of agreements between branch office managers, registered reps and brokerage firms.”