FSC Securities Corp., a defunct broker-dealer that is now part of the giant Osaic network of firms, yesterday lost a lawsuit from a former branch employee who sued the firm alleging an intolerable workplace; damages and costs for the ex-employee totaled $2.5 million, including punitive damages.
The former employee, Cynthia Ann Posipanko, was registered with FSC in Pennsylvania from 2000 to 2021.
“The punitive damages is a massive message sent by the arbitrators that they were extraordinarily upset in the case,” said Andrew Stoltmann, a plaintiff’s attorney. “This is what we call an old-fashioned whupping.”
Posipanko filed an arbitration complaint in 2023 against FSC Securities and the advisor she worked for, James Ransom Potoka; she claimed “constructive termination in violation of public policy,” which means an employer created an intolerable work environment, unlawful retaliation against a whistleblower, and failure to supervise, according to the arbitration award.
She also alleged that FSC and Potoka violated FINRA rules regarding supervision. Potoka is a 44-year industry veteran and based outside Philadelphia.
Osaic is a giant network of broker-dealers and registered investment advisors, working with more than 11,000 financial advisors and $700 billion in client assets. On its website, it reports that close to one-third of its advisors are women.
FSC Securities closed in 2023 and its advisors were moved into Osaic Wealth, which absorbed several other firms into one operation and brand.
“FSC believes the award is unsupported by the facts and is evaluating all available legal options,” an Osaic spokesperson said. “The matter involves an individual employed by one of FSC's independent branch offices, not FSC directly, who voluntarily resigned from her position in 2021 and has not reentered the workforce. Because further proceedings may follow, FSC is unable to further comment."
Posipanko worked as an OSJ or supervisor of a branch office and was an employee of a person she was required to supervise; that relationship presented a conflict of interest, according to people familiar with the case.
According to the three-person FINRA arbitration panel award, Posipanko was awarded $1.47 million in compensatory damages, $750,000 in punitiAs inve damages, $250,000 in non-economic damages, and $37,000 in costs.
“What makes this award significant isn't just the size — it's the structure,” said Brandon S. Reif, Posipanko’s attorney. “The punitive damages tell broker-dealers the panel found the firm's conduct indefensible. The non-economic damages tell them the human cost of retaliation is real and compensable.”
“Together, they close the two doors firms have historically used to escape accountability: minimizing the conduct and discounting the harm,” Reif said.
“For years, firms have counted on compliance professionals being too intimidated, too isolated, and too financially outmatched to fight back,” Reif added. “We built this case to prove that calculation wrong, and the panel agreed — with what we believe is one of the largest non-economic damages awards ever entered in a FINRA employment retaliation case.”
Meanwhile, Osaic last week said it clinched more than $2 billion in new capital with Bain Capital joining existing investors Ares and Lexington Partners.
Rumors that Bain Capital was a likely new investor in Osaic swirled in recent weeks.
Private equity firm Reverence Capital Partners, which bought Advisor Group in 2019 and rebranded it as Osaic a few years later, announced the more than $2 billion recapitalization last Thursday.
The move aims to fuel the growth of Osaic’s network of broker-dealers and registered investment advisors.
Ares and Lexington Partners are the lead investors in the continuation vehicle.
Clarification: An earlier version of this story has been amended to remove a reference to a company that has no involvement in this case or with Posipanko.
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