Client Termination Case Turned Success Story at HLBS Law

Written by Mallory Nissen & Chelsea Bauer on August 18 2024

Recently at HLBS Law, our attorney Chelsea Bauer had a very exciting win in a big case. Her client was a successful financial advisor rising in the ranks at Goldman. He had a clean record and had no complaints from his clients or superiors. Suddenly, he was discharged due to a customer complaint about "trading ahead." The financial advisor made a trade in the same stock as his client, but did the trade a day or so after his client.

The advisor's customer was an accredited investor who knew exactly the types of things he wanted to invest in. The customer had a lot of investment experience and understood the risks of the market. So, once he asked our client to make the trade, he passed it along to Goldman to be processed immediately. Our client is not allowed to make these trades himself, so he submitted it to the responsible party. However, there was an error and the trade was not picked up. This caused a delay of a couple days. This wasn’t by any fault of our client, and he continued to check in on the trade and keep the customer updated. The trade went through a couple days later, and the customer actually came out on top – the shares were selling for less by the time the trade actually went through. The customer wasn’t harmed, and there was never any customer complaint.

Then, our client was watching the changes in the market himself and decided to make his own trades, which he did a day or so after his client's trade was submitted. Goldman argued that trading ahead was a terminable offense because our client’s actions could have affected the customer’s trade price and was therefore against Goldman policy. However, we provided evidence and elicited testimony that: (1) our client did not trade ahead – he did not place his trade until a day or so after the customer’s trade had been submitted, and Goldman’s delay in processing the customer’s trade request was not our client’s fault; (2) the delay did not harm the customer because, during the delay period, the share price actually changed in the customer’s favor; and (3) even if the share price had changed unfavorably during the delay period, the back office would have corrected any negative effects of the delay.

Goldman argued that, because he was discharged and his disclosure says he was “discharged”, the disclosure was true and therefore should not be expunged. However, we argued that it was potentially defamatory and should be expunged pursuant to FINRA Rule 8312 and/or in the interests of equity and justice because of the immense harm to our client’s reputation. The arbitrator was persuaded that the disclosure was potentially defamatory. In the award, the arbitrator made a finding that trading ahead did not occur here, and he granted expungement “based on the defamatory nature of the information.” We are very happy with this win and seeing our client's name cleared from these complaints and his record restored to it's clean slate.

Contact us at HLBS Law if you think you are eligible for removing defamatory claims from your record.

Photo by: Giammarco Boscaro