JPMorgan Securities is planning to appeal a $2.5 million arbitration award granted to a former advisor who accused the firm of defaming him. The allegations were made in relation to the description of the circumstances on the U5 form, which is entered into brokers’ records in the industry self-regulator Finra’s BrokerCheck database.
Arbitration Panel Grants Partial Award
In a two-to-one decision, the Finra arbitration panel granted Liet Han half of the $5 million in monetary damages he was seeking. Additionally, the panel directed JPMorgan to update Han’s U5 form by replacing the specific allegations with a generic description of his termination.
Allegations Against Han
JPMorgan terminated Han in December 2017, citing his alleged violation of anti-money-laundering laws. The firm claimed that Han had divided a large personal deposit into smaller sums in order to avoid triggering the bank’s reporting obligation.
JPMorgan’s Response
JPMorgan spokesperson Veronica Navarro expressed concern about the impact of the decision on the industry’s fight against money laundering. She confirmed that the firm intends to challenge the ruling and will pursue all legal options available.
Han’s Transition to Ameriprise
Following his termination, Han, who managed $147 million at JPMorgan, has since joined Ameriprise.
Common Disputes Involving Termination Records
Disputes regarding brokers’ termination records are not uncommon. When brokers are fired, they often seek to amend or expunge their records to increase their chances of joining another firm. JPMorgan recently faced another U5 dispute, resulting in a $300,000 fine from a Finra panel for the description of the circumstances surrounding the firing of another former broker.
Misunderstanding Leads to Termination
Han, a registered broker with Finra since 2002, found himself facing termination after a banking incident where he unknowingly violated anti-money-laundering (AML) rules. Han’s termination was noted on his U5 form as “terminated,” but he fiercely advocated for it to be labeled as “other” instead.
The incident occurred when Han attempted to deposit a substantial amount of money, exceeding $15,000, into his bank account. Han’s intention was not to flout any regulations; rather, it was a result of misinformation provided by a bank teller. Han’s wife had informed him that such a large deposit would trigger a Currency Transaction Report. In a state of confusion, Han decided to withdraw $6,000 and planned to deposit that amount on the following business day, as per the account of the dissenting arbiter.
Interestingly, the chair of the panel, who served as the arbiter, chose to voice an extensive critique of the majority ruling. They described Han and his wife’s testimony as unreliable, far-fetched, self-serving, and untruthful.
The arbiter specifically pointed out Han’s substantial experience in the brokerage industry and argued that he possessed an in-depth understanding of AML rules, including the prohibition against structuring. Structuring involves splitting significant sums of money into smaller transactions to evade reporting requirements. According to the arbiter, Han had recently undergone anti-money-laundering training just 24 days before the alleged misconduct at the bank.
The dissenting arbiter further highlighted Han’s foggy state of mind during the incident. Even when Han’s wife informed him about the teller’s requirement for completing a proper form due to the large cash deposit, he admitted that his mind was not fully grasping the situation. This led to the decision to “pull back” the cash and deposit an amount below $10,000 in order to avoid the mandatory form. The exact amount that was pulled back was subsequently deposited the next business day. The arbiter made it clear that such “pull-back” actions were seen as suspicious and indicative of unlawful structuring, portraying it as a blatant red flag.
In conclusion, Han’s termination stemmed from a genuine misunderstanding rather than a deliberate attempt to bypass regulations. Despite his experience in the brokerage industry, the confusing circumstances and lack of clarity led to a misinterpretation of the teller’s instructions. The dissenting arbiter raised valid concerns about the credibility of Han’s testimony, but it is vital to consider that the incident appears to have been a result of his foggy mental state at the time.
