According to FINRA, Commerce Brokerage Services, Inc. was censured and fined $75,000 for failing to comply with FINRA's Code of Arbitration Procedure for Industry Disputes.

FINRA's rules require that disputes between member firms and their former associated persons or other member firms be resolved through FINRA arbitration. Commerce Brokerage violated these rules in two separate instances.

In the first instance, the firm filed suit in Missouri state court against a former associated person alleging violations of a non-solicitation and confidentiality agreement. The firm sought injunctive relief and damages but failed to file a required statement of claim with FINRA Dispute Resolution.

In a more significant second instance, the firm's non-FINRA-member affiliate filed suit in Kansas state court against two former associated persons and their new member firm, alleging violations of non-solicitation agreements, misappropriation of trade secrets, and tortious interference. The other member firm incurred approximately $800,000 in attorney fees defending against this litigation. The court eventually ruled that the dispute was subject to mandatory arbitration and stayed the action. A FINRA arbitration panel subsequently ordered Commerce Brokerage to pay the other firm approximately $800,000 in compensatory damages.

This case reinforces that securities industry participants must resolve their disputes through FINRA's arbitration process rather than circumventing it through state court litigation. This requirement helps ensure efficient and consistent resolution of industry disputes while protecting all parties from unnecessary litigation costs.