Gross v. HSBC

Background

Adam Gross, a former HSBC Bank employee, was terminated in 2020. HSBC was required, as a member of the Financial Industry Regulatory Authority (FINRA), to submit a Uniform Termination for Securities Industry Registration Form, known as a Form U-5, describing the reasons for Gross’s departure. The Form U-5 stated that Gross had been terminated for using a prohibited electronic communication platform to communicate with a prospect about a hedge fund that HSBC had not approved for sale.

Gross asked a FINRA arbitration panel to expunge, or remove, the allegedly inaccurate Form U-5. Under a private settlement agreement, HSBC did not oppose the request and presented no evidence against it at the hearing. The panel initially denied Gross’s claim in a one-sentence award.

Gross then petitioned the court to vacate, or set aside, the initial award. The court granted that petition and sent the matter back to the panel because it could not identify a basis in the record for the panel’s decision. The court did not decide the merits of Gross’s claim and stated that the panel could reach the same result if it provided a sufficient explanation.

On remand, the FINRA panel again rejected Gross’s claim but issued a detailed explanation. Gross filed the present petition to vacate the revised award. He argued that the revised award disregarded the undisputed evidence he had presented. HSBC did not file a response to this second petition.

Legal Standard

The Federal Arbitration Act governs judicial review of FINRA arbitration awards. Courts may vacate awards only in narrow circumstances. One recognized ground is “manifest disregard of the law,” meaning an unusually serious failure by arbitrators to follow a clearly applicable legal rule. An award must be upheld if it has even a barely supportable explanation. A court may not overturn an award merely because it would have reached a different legal or factual conclusion, and arbitrators generally have authority to weigh evidence and assess witness credibility.

Court’s Analysis

The court held that the revised award did not show manifest disregard of the law. The panel found that Gross had used the terms “prospect” and “client” interchangeably even though they referred to different types of relationships. Because Gross had the burden of proving, by a preponderance of the evidence, that the Form U-5 was false, the panel concluded that his imprecise use of those terms undermined his credibility and left him unable to meet that burden.

The court rejected Gross’s reliance on a prior decision involving arbitrators who ignored substantial evidence supporting a terminated employee’s claim. The court distinguished that case because Gross had called only himself as a witness, HSBC had not conceded that the Form U-5 was incorrect, and HSBC’s stated rationale for the termination remained part of the evidentiary record. The court explained that even unrebutted testimony does not require an arbitrator to accept it as adequate or reliable.

The panel also considered Gross’s attempt to distinguish “networking” from “soliciting.” The court observed that the Form U-5 referred to communicating with a prospect, not soliciting business. The panel found that Gross had not provided sufficient evidence establishing what his “networking” characterization meant. The court declined to reweigh that evidence and concluded that the panel’s treatment of the distinction did not meet the high standard required for vacatur.

Disposition

Judge Paul A. Crotty denied Gross’s petition to vacate the FINRA arbitration award. The court confirmed the panel’s revised award, directed entry of judgment in HSBC’s favor, and directed the Clerk of Court to close the case. The opinion’s conclusion does not state that the denial or confirmation was with or without prejudice.