A FINRA arbitration panel ordered Merrill Lynch to pay a former advisor $750,000 in compensatory damages for defamation on his U5 form after he was discharged from the firm.

Miguel Ballestas accused the firm of wrongful termination, negligence and defamation, among other complaints, relating to actions taken surrounding his termination in 2014, according to FINRA award documents.

Ballestas was discharged from Merrill Lynch after an “allegation related to possible insider trading by the registered representative and a client,” according to FINRA BrokerCheck records. Those allegations stemmed from a 2013 corporate merger announcement, per BrokerCheck.

Merrill brought the action against Ballestas for failure to repay a promissory note of $407,451, according to FINRA. However, the claim for repayment on the loan was settled separately last year, according to the arbitration award decision. Ballestas’ counterclaim sought $26 million in damages for loss of income, compensation and his book of business, as well as mental pain and other allegations, according to the regulator.

The $26 million figure includes compensation that was offered by another wirehouse that was set to hire Ballestas just prior to his termination by Merrill, according to Michael Taaffe, an attorney and senior partner at Shumaker, which represented Ballestas.

“They terminated him the weekend before he was supposed to leave,” Taaffe says. “To be perfectly frank, he deserved more.”

Exterior of Bank of America Merrill Lynch building.
Bloomberg News


The wirehouse set to hire Ballestas backed off after the allegations of insider trading were entered into his U5, Taaffee says. While at Merrill, Ballestas had production of more than $2 million, the attorney says.

“Unfortunately they didn’t go as far as to include punitive damages,” says Miguel Ballestas. “But, the primary purpose was fulfilled, in essence, basically to clear my name and to point to this issue of defamation,” he says, adding that hopefully this case will allow other advisors in similar situations to come forward.

The panel also recommended the expungement of the termination explanation in Ballestas’ Form U5, which should be changed to “conduct resulting in the loss of management’s confidence.” The reason for termination shall remain the same, according to FINRA.

"We are disappointed that there was any award but we are gratified that it is a small fraction of the $26 million sought," said of spokesman for Merrill Lynch. The firm declined to give additional comment.

A 30-year industry veteran, Ballestas worked with Merrill Lynch since 1988 until his termination, per BrokerCheck records. Another claim on file with BrokerCheck alleged unauthorized trading from October 2012 to May 2013 and was settled for $60,000, per BrokerCheck.

Ballestas is now the managing partner at the hybrid firm Ballestas Group in Miami, which is affiliated with Bolton Global Capital, per BrokerCheck.

“The institution has changed completely since I started,” Ballestas says of Bank of America Merrill Lynch. “The way the people run the business is different, the way they behave is different and the end result is different. It’s no longer the ‘Mother Merrill’ that we came to love.”


Sean Allocca

Sean Allocca is an associate editor of Financial Planning, On Wall Street and Bank Investment Consultant.