Former Fidelity broker wins $499K in a wrongful termination lawsuit

Fidelity Investments must pay a former broker nearly $500,000 in compensatory damages after he accused the firm of wrongfully terminating and defaming him. The ruling comes at a time when several brokers have successfully contested their employers’ Form U5 termination decisions.

Two of the three members of a Financial Industry Regulatory Authority panel in New York ruled in favor of Ryan Sanghak Lee, who asserted wrongful termination, defamation, tortious interference with prospective economic advantage and “spoliation/fraudulent concealment of evidence.” The dissenting panel member said Fidelity should have won the dispute and that Lee’s claims should have been dismissed in their entirety

Lee, who had worked in the company’s Wayne, N.J., office, had sought damages in excess of $1 million, expungement of the U5 termination disclosures on his record and expungement of a client complaint. Fidelity denied the allegations and requested that the claims be dismissed and his expungement request be denied.

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 had sought $22,000, which Fidelity denied. 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,” he said. “All disclosures and details supporting this event had been properly documented.”

The disclosure on Lee’s firing from Fidelity in 2018 revealed 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.”

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The majority of the panel ruled that all references to Lee’s termination from Fidelity maintained by the Central Registration Depository 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.’”

Broker wins are increasing

Arbitration wins for brokers seeking redress for alleged U5 defamation, with or without monetary damages awarded, are increasing. Last September, a Finra panel handed an ex-Morgan Stanley advisor an award calling for the company to remove harsh language from her U5. But the victory that has received the most attention happened in 2019, when Mark Munizzi, a former UBS Wealth Management USA complex supervisory officer in Chicago, won an $11 million arbitration award against UBS, which was upheld by the courts.

Lee began his career in 2000 at Janney Montgomery Scott in Philadelphia and went on to work for Citicorp and Merrill Lynch in New York. Before joining Fidelity, he had four customer disputes. One was denied and the others were settled, according to his BrokerCheck record. His attorney, Laurence Landsman of Landsman Saldinger Carroll in Chicago, downplayed the previous allegations and said Lee had had a successful career as a financial advisor.

“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,” Landsman said,. ”I think that brokerage firms need to be held to high standards when it comes to their investigations and their termination decisions and the disclosures that they put on U5s, because for some of these brokers, these disclosures are a death sentence to their careers.”