Although brokerage firms enjoy the protection of a qualified, and sometimes an absolute, privilege when reporting alleged violations to securities regulators, that privilege does not apply when the firm sends defamatory letters to a broker's customers.
LPL learned that lesson the hard way when a FINRA arbitration panel ordered it to pay $630,000 to one of its former brokers, who was terminated for borrowing money from a high school friend who was also a client. According to press reports, and the arbitration claim, LPL terminated the broker, and sent letters to his clients which the broker claimed were defamatory.
LPL Must Pay Broker $630K After Defamatory Letter Campaign | IAG Breaking News
