Gag order in broker’s fight with firm voided
Ruling may alter arbitration cases
In a decision that could have sweeping ramifications in the investment business, a Suffolk Superior Court judge has ruled that Oppenheimer & Co. and a panel of arbitrators overstepped their bounds — and the First Amendment — in banning a Boston broker from discussing details of his dispute with the firm in public.
Arbitration is the rule of the road in the brokerage industry: It’s a system of handling grievances between firms and their customers or employees that’s meant to sidestep the time and expense of the court system. It also often offers a veil of secrecy, because records and proceedings are largely out of the public eye.
But the New York brokerage firm Oppenheimer & Co. took that secrecy too far, Judge Frances A. McIntyre ruled on Monday. When an arbitration panel awarded Oppenheimer broker James Dever $85,779 for his complaint against the firm, it also said all testimony and documents in the case had to be kept confidential, at Oppenheimer’s insistence.
The gag order “restrains speech’’ and “offends public policy,’’ McIntyre wrote in her decision. She said so broad a confidentiality award “violates public policy, is contrary to legal and constitutional mandates, and exceeds the powers accorded to this arbitration panel.’’
The decision could have an impact not just on brokers but on customers. Across the country, investors routinely sign waivers, promising to take up any dispute with their broker or brokerage firm before a private arbitration panel, rather than in a court of law. And while many customers prefer to have these proceedings remain private, the Massachusetts ruling suggests that firms can’t force clients or brokers to keep quiet about their cases.
An Oppenheimer spokesman said the firm is not currently planning to appeal, but is “reviewing the judge’s invitation to submit a motion to assure that documentation that is protected by privacy laws should remain confidential.’’ He also said, “Oppenheimer’s interest in maintaining the confidentiality of the documentation and testimony with respect to the arbitration proceeding was to assure the confidentiality of its clients’ information in accordance with privacy laws and regulations.’’
Dever’s lawyer, Angela H. Magary, called the decision a victory for the “little guy.’’
“This is a big deal,’’ she said. “When you become an employee of the financial services industry, you’re not checking all your rights at the door.’’
For Dever, the decision means being able to fight what he says is an unfair mark on his record. He was manager of Oppenheimer’s Boston office until 2007. He was pushed out, he said, after cooperating with a regulatory investigation of the firm, against the orders of higher-ups.
In that case, Oppenheimer had to pay a $1 million fine for failing to supervise a broker. Massachusetts securities regulators marked Dever’s record in the matter, even though he was not charged. Dever wants to clear his name, but he could not use any documents or testimony from the case because of the confidentiality order.
After Dever talked to the Globe about his case in 2008, the lead arbitrator threatened him with “Draconian fines’’ if he discussed the case publicly. According to a transcript, the arbitrator also said, “If you want to fight [and] you want to tangle with this panel, you may.’’ Now Dever may be able to move forward, though the records remain sealed for 45 days.
A spokesman for the Financial Industry Regulatory Authority, which oversees brokers, declined to comment on the court decision late yesterday. FINRA’s guidelines allow for confidentiality, but only if both parties in an arbitration agree to it.
Stuart D. Meissner, a New York lawyer who represented Dever in the arbitration, applauded the judge’s decision.
“It definitely will have an impact and will be utilized in many arbitrations going forward,’’ he said. “Firms in general try to bully arbitrators to make many things in cases before them confidential, when they really do not meet the legal threshold of being confidential.’’
Meissner said he hopes the decision will “make firms think twice in pursuing such orders.’’
Beth Healy can be reached at firstname.lastname@example.org.