May 21, 2012 / 5:50 PM / 7 years ago

FINRA panel orders Advanced Equities to pay $4.5 mln

NEW YORK, May 21 (Reuters) - A Financial Industry Regulatory Authority arbitration panel ordered investment banking boutique Advanced Equities Inc to pay $4.5 million in damages and other costs stemming from a breach-of-contract claims filed by a former employee, John Galinsky.

The ruling was made public on Monday.

Galinsky in January 2010 asked arbitrators for $100 million in actual damages and $40 million in punitive damages over what he said was the firm’s failure to pay certain commissions for his efforts raising capital for clients such as Arbinet, Bloom Energy, Force10 Networks, Infinera Corp, Motricity Inc and Peregrine Semiconductor.

Galinsky also claimed fraudulent inducement, unjust enrichment, retaliatory discharge and breach of contract.

The FINRA panel awarded Galinsky $3.47 million in actual damages as well as $347,000 in interest, $500,000 in punitive damages and $211,314 in other trial-related costs.

The punitive damages were awarded because Advanced Equities “exhibited a reckless disregard for the warrant rights of the broker and breached their fiduciary duties to the broker,” the panel said in its ruling.

The Chicago-based investment bank, which makes late-stage venture capital investments in technology companies, was also ordered to pay FINRA $61,650 in session fees for 51 pre-hearing and hearing sessions spanning from June 2010 to April 2012.

Advanced Equities chairman and co-founder Keith Daubenspeck, named in the complaint as a respondent, declined to comment.

Last August, Advanced Equities agreed to sell its holdings in one of the country’s largest independent brokerages, First Allied Securities, to private equity buyers for undisclosed terms.

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