A Finra arbitration panel has ordered Fidelity Brokerage Services to pay a former broker $500,000 over claims of wrongful termination and defamation.
Two members of the three-person Financial Industry Regulatory Authority panel last week awarded Ryan Sanghak Lee $499,999.99 in compensatory damages. The panel also held both Lee and Fidelity liable for hearing session fees each totaling $14,700.
In the claim that was initially filed in October 2019 and amended in September 2020, Lee, who had worked in the firm's Wayne, N.J., office, had sought damages in excess of $1 million plus interest, costs, expenses including expert witness fees, and unspecified punitive damages.
He asserted causes of action including wrongful termination, defamation, tortious interference with prospective economic advantage and “spoliation/fraudulent concealment of evidence.”
And while the claim was brought against Fidelity Brokerage Services LLC and Fidelity Personal and Workplace Advisors, the panel said it did not make a determination against Fidelity Personal because the entity “is not a member or associated person of Finra and did not voluntarily submit to arbitration.”
Lee also had sought to clear his record, asking the panel to expunge the termination disclosures on the Form U5 filed by Fidelity and a client complaint.
A client in May 2019 alleged that while with Fidelity, Lee’s recommendation to “surrender an annuity to fund a managed account was unsuitable and resulted in unanticipated tax consequences.” The client’s had sought $22,000, which was denied by Fidelity, according to Finra.
Lee said the customer was aware the transfer could create a tax liability. “It was the customer's sole decision to transfer the funds to the managed account as she did not feel comfortable in managing her own investments within the annuity. All disclosures and details supporting this event had been properly documented,” he was quoted as saying in the Finra award.
The disclosure on his firing from Fidelity in 2018 revealed that it was over an “allegation regarding whether employee took credit for detailed customer interactions for purposes of potential incoming compensation credit without actually having had either any interaction or the requisite degree of interaction with the customers.”
But the majority of the Finra panel ruled that all references to Lee’s termination from Fidelity maintained by Central Registration Depository (CRD) must be expunged. “The Reason for Termination shall be changed to “Other.” The Termination Explanation should be deleted in its entirety and shall be replaced with the following language: ‘After a dispute between Employer and Employee relating to an accusation that Employee violated rules relating to customer interactions, Employee left the company,’” the panel ruled.
The majority panel further recommended the expungement of all references to the clients’ complaint from the registration records maintained by the CRD. “Any ‘Yes’ answers should be changed to ‘No,’ as applicable,” it added.
The attorney representing Fidelity, Leni D. Battaglia of the New York law firm Morgan, Lewis & Bockius, did not respond to an inquiry for comment.
Lee’s attorney, Laurence Landsman of Landsman Saldinger Carroll in Chicago, said the outcome of the case was a “great vindication” for his client.
“Obviously, there are financial advisors out there who have done very bad things and deserve to have damaging U5 disclosures, but not all of them,” he said.
“I think these are very important cases because of the power and influence that these brokerage firms have on the rest of somebody’s career. I think that brokerage firms need to be held to high standards when it comes to their investigations and their terminations decisions and the disclosures that they put on U5s because for some of these brokers, these disclosures are a death sentence to their careers,” Landsman added.
Lee’s BrokerCheck showed that after being fired from Fidelity in 2018, he joined Santander Securities in 2019 until 2021. According to his LinkedIn page, in August 2021, he founded Pegasus Strategic Consulting Group Inc., an affiliate office of Medical Revenue Management Association of America.
He entered the industry in 2000 with Janney Montgomery Scott, where he spent a few months before moving to Citigroup Investment Services. He worked for several other firms before moving to Merrill Lynch in 2009 and Fidelity in 2012.
Prior to joining Fidelity, Lee’s BrokerCheck profile reflected four other customer complaints, three of which were settled, and one denied.