On November 17, 2015, Justice Singh of the New York County Commercial Division issued a decision in Rice Securities LLC v. Bonwick Capital Partners, LLC, 2015 NY Slip Op. 32204(U), holding that an administrative employee was not subject to arbitration under FINRA rules.
In Rice Securities, the plaintiff brought a proceeding to “compel respondents’ arbitration before FINRA Dispute Resolution, Inc.” One respondent opposed the petition, arguing that she was not an “associated person” of the broker-respondent “who can be compelled to arbitrate.” The court agreed with the respondent, notwithstanding that she was accused of taking “substantial amounts of” the petitioner’s “data without permission when she left” the petitioner’s employ “in order to further” the broker-respondent’s “fraud,” explaining:
Rule 13200(a) of the FINRA Code of Arbitration for Industry Disputes states:
Except as otherwise provided in the code, a dispute must be arbitrated under the code if the dispute arises out of the business activities of a member or an associated person and is between or among: members; members and associated persons; or associated persons.
FINRA rules define the term “associated person” as follows:
The term “associated person” means: . . . (4) any employee of the applicant, except any person whose functions are solely clerical or ministerial . . . .
[the r]espondent . . . states in a sworn affidavit that she holds no professional licenses, nor is she registered with FINRA or any other regulatory agency. [She] asserts that all of her work is subject to the supervision of her superiors; she has no interaction with [the broker-respondent’s] customers, regulators or competitors; she has no authority to sign documents on [its] behalf . . . ; and she cannot make decisions on behalf of the firm or otherwise bind it in any way.
(Internal quotations and citations omitted). The petitioner did not present facts rebutting the respondent’s description of her duties. For that reason, the court held that she was “not an “associated person” as defined by the rules and regulations of FINRA.”