May 12 The brokerage unit of Stifel Financial Corp must pay a total of $2.7 million to a former head trader who said the firm defamed him and wrongfully withheld his bonus payment, a securities arbitration panel has ruled.
A Financial Industry Regulatory Authority panel found Stifel, Nicolaus & Company liable in a case filed by Sean Horrigan, according to a ruling late on Friday. Horrigan had worked for Stifel and for a firm it acquired for a total of 14 years, according to a regulatory filing.
A Stifel spokeswoman declined to comment.
The case marks a rare instance in which a licensed securities professional prevailed in a defamation claim against a former firm, say lawyers.
A successful outcome is unusual and typically stems from facts that are very unfavorable to the firm, said Thomas Potter, a lawyer for Burr & Forman in Nashville, Tennessee, who represents brokerages and who was not involved in the case.
Horrigan became the head of agency trading at Piper Jaffray shortly after his departure from Stifel.
He filed the case in 2012, alleging Stifel defamed him by including certain allegations about his termination in a form that brokerages must file in an industry database when brokers leave. Horrigan, who initially requested more than $2.8 million, also alleged that Stifel breached his employment contract by not paying a bonus he earned, according to Jonathan Sack, the New York lawyer who represented him.
The dispute dates back to a telephone call Horrigan overheard when he mistakenly picked up one of several phones on the trading desk, Sack said. During the call, a New York manager made disparaging personal remarks to a salesperson in Baltimore about Horrigan's wife, who had also worked for Stifel, Sack said. Horrigan hung up and reacted emotionally at his desk after trading hours, Sack said.
Stifel demoted Horrigan and then fired him six weeks later in early 2012, weeks before the firm paid its 2011 bonuses, Sack said. Stifel then argued Horrigan was not entitled to a bonus for his work in 2011 because he was no longer employed there on the day it handed out the payments, Sack said.
"It's a fiction that you don't get to earn your bonus if you're not there on bonus payout day," Sack said.
Industry professionals are often duped into believing that is the case, but it typically is not, unless they signed contracts that require them to be employed on that day, Sack added.
The firm then wrote in Horrigan's dismissal paperwork that, while Horrigan had not harmed customers, he had "engaged in unprofessional conduct that was detrimental to management and co-workers," according to a statement of claim.
The FINRA panel ruled the phrase was defamatory and recommended a new phrase that said his conduct "was not in parity with management's new strategy," according to the ruling.
The panel did not explain the reasons for its decision, as is typical of FINRA arbitration rulings. (Reporting by Suzanne Barlyn. Editing by Andre Grenon)