After a FINRA arbitration panel ruled that a former Wells Fargo broker was the subject of a “vindictive and defamatory” Form U5 amendment, the company must pay a million-dollar award.
Financial advisor Aaron T. Olson will receive $1.4 million in compensatory and punitive damages and costs from Wells Fargo Advisors under the unanimous Feb. 28
“The actions of at least one management-level employee” resulted in Wells Fargo filing a U5 amendment “which was vindictively motivated,” according to a brief explanation included in the arbitrators’ decision.
Wells Fargo “failed to follow filing requirements outlined in FINRA’s requirements and guidelines and acted inconsistently with earlier and later more egregious takings of WFA’s highly confidential non-protocol customer information by other terminated financial advisors,” the document states. The amended U5 “was both vindictive and defamatory in nature, causing material and continuing harm to claimant’s reputation and career as a financial advisor.”
Representatives for Wells Fargo disputed the panel’s finding, although they didn’t directly say whether the firm will attempt to get the decision vacated in court and didn’t identify the manager in question.
“We are disappointed with the decision and believe we followed FINRA requirements and guidance in filing an amended U5 for this former employee,” spokeswoman Shea Leordeanu said in a statement.
Olson didn’t respond to inquiries at his current firm, an RIA called Purpose Comprehensive Wealth Management where he’s listed as operating out of a Weddington, North Carolina-based office of the Verona, Wisconsin-based firm. The attorney listed as representing him didn’t respond to requests for comment, either. InvestmentNews first
The ruling came a few weeks after another panel
Advisors and attorneys representing them often cite problems with Form U5 disclosures that they say
Although the award leaves out relevant details about the type of client information Wells Fargo alleged that Olson took with him upon leaving in August 2020, it looks from the ruling to be the kind that the firm usually “does little to let people walk out the door with,” Herskovits said.
“It's safe to assume it wasn't like Social Security numbers and dates of birth and drivers license info,” he said. “The panel was offended deeply by the conduct — probably a branch manager or complex manager or something like that — who probably had an ax to grind with someone who jumped ship for a competitor.”
Olson, a 14-year industry veteran, launched his RIA in January 2021 after tenures with Mutual Advisors, Wells Fargo, U.S. Bank and Chase Investment Services, according to the SEC’s Investment Adviser Public Disclosure website.
He filed the claim against Wells Fargo in October 2020, accusing the firm of fraudulent inducement, U5 defamation and interference with prospective economic advantage relating to his employment and termination, the award states. At the hearings, he ultimately requested between $250,000 and $750,000 in compensatory damages on the fraud claim and $250,000 to $1.75 million for defamation, as well as punitive damages of $250,000 for each of the two allegations, according to the document. Olson also asked for expungement of the U5 disclosure.
In its answer to the statement of claim, Wells Fargo sought dismissal of Olson’s case and filed a counterclaim seeking $367,372.78 plus interest on an unpaid promissory note loan it made to Olson and between $200,000 and $300,000 for a “breach of the Trade Secrets Agreement.” The panel stopped short of ruling in favor of Olson on every aspect of the case. The arbitrators gave Wells Fargo the payment of the remainder of the promissory note it said Olson owed the firm and denied any request for attorney fees, along with Olson’s claim of interference.
On the other hand, the decision ordered Wells Fargo to pay $700,000 in compensatory damages each for the fraud and defamation claims, $200,000 in punitive damages for each of the two claims under North Carolina law and 8% interest on the damages starting 30 days after the award and ending when it’s paid. In addition, the panel granted expungement of Olson’s record, rejected Wells Fargo’s trade secrets claim and assessed his filing fee to the firm.
It’s not clear whether the manager or Wells Fargo could face any other consequences, according to Herskovits, who describes any FINRA enforcement actions related to U5 defamation as “few and far between.” It appears that Olson “lost a sizable percentage of his book” when he left the firm in 2020, Herskovits said.
“This isn't the first time,” he said. “I’m not shocked. I think a lot of firms try very hard to get things right when it comes to a U5, but I’ve seen many instances where the U5 has been abused and it’s been used as a tool to extract a competitive advantage over a departing financial advisor.”
