FINRA Panel Rules Against Raymond James - Issues $1.5 Million Award to Investors

An elderly couple is awarded $1.5 million in claim against Raymond James that accused one of the firm’s branches of fraud, concealment, and unsuitable sales.

FINRA Awards Investors $54 Million in Citigroup MAT/ASTA Case

A FINRA arbitration panel issued a $54 million award to a group of investors in a claim against Citigroup Global Markets Inc. in regard to MAT/ASTA funds.

SEC Approves Controversial FINRA Revisions to Securities Arbitration Discovery Guide

Last week, the SEC finally approved FINRA's proposed changes to the arbitration discovery guide.

Summary Shows Investors Continue to Prevail in FINRA Arbitration Decisions

Investors were awarded damages (monetary damages or non-monetary relief) in over half (51 percent) of the arbitration cases decided by FINRA panels this year.

Morgan Keegan Ordered to Pay Punitive Damages in Madoff Feeder Fund Case

FINRA has found Morgan Keegan & Co. Inc. liable for both compensatory and punitive damages in an arbitration claim that involved a Madoff “feeder fund."

FINRA Orders Citigroup to Pay $6.4 Million to Investors for Losses in Municipal Arbitrage Fund

On Monday, a three-member FINRA arbitration panel awarded a group of investors $6.4 million in an arbitration claim against two units of Citigroup Inc. for losses related to investments in a series of MAT Finance LLC funds (“UPDATE: Finra: Citigroup To Pay $6.4M For Municipal Arbitrage Loss,” Dow Jones Newswires, Feb. 8, 2011). The MAT Finance municipal arbitrage trust funds were touted as an “attractive alternative” to a bond index, according to a Nov. 6 article by the WSJ (“Citi Debt Funds Probed by SEC”). The funds were designed to borrow money at low short-term rates and reinvest the borrowed funds into longer-term bonds with higher rates of return. Eventually, according to the WSJ, the funds ended up with $8 in borrowed money for every $1 invested. According to the Dow Jones Newswire, it was after the funds lost almost 80 percent of their value between 2007 and 2008, that the group of investors (which included D. Theodore Berghorst, chairman and chief executive of Vector Securities LLC in Deerfield Ill., and various trusts and limited liability companies) brought their claim against Citigroup Global Markets Inc. and Citigroup Alternative Investments LLC. In their claim, the investors alleged civil fraud, misrepresentation, and breach of fiduciary duty and requested $12 million in damages. The $6.4 million award, while it is the one of the largest awards for losses related to MAT Finance funds, is substantially less than the amount the investors requested. Additionally, one of the arbitrators in the three-member panel dissented in Monday’s ruling. No explanation for the dissent was given. Still, the award may be a signal that Citigroup will continue to be held liable for investor losses related to the MAT Finance funds. About our law firm: The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

FINRA Awards Investors $1.6 Million in Claim Related to DBSI-Packaged TICs

A husband and wife in their 70s recently won the largest DBSI-related arbitration award to date - $1.6 million - in a claim filed against QA3 Financial Corp, according to a Jan. 23 InvestmentNews article (“QA3 hit with $1.6M award for sale of TICs to elderly couple”). The FINRA arbitration panel that heard the claim said QA3 failed to “adequately supervise” the broker who sold the tenant-in-common exchanges to the couple. DBSI, an Idaho-based, real estate investment company that specialized in acquisitions and development, filed for bankruptcy a little over two years ago (“DBSI, a real estate company, files for bankruptcy,” Reuters, Nov. 10, 2008). At the time, the company said it had up to 5,000 creditors, many of whom were individual investors with money tied up in the company’s properties. From approximately 2005 through Nov. 2008, DBSI was a major packager of the hugely popular tenant-in-common (TIC) real estate investments (“Brokers' DBSI commissions targeted,” Star Tribune, Nov. 24, 2010). The investments allowed multiple investors to pool their money to buy shares in an investment property. When the housing market crashed, the profits evaporated. It was alleged that DBSI sold over-priced properties to investors and used the profits from the inflated sales to pay dividends to previous investors, rather than paying dividends based on actual rent-related profits. After DBSI filed for bankruptcy, a number of investors filed claims against the broker-dealers who sold the DBSI-packaged TICs. According to data released by InvestmentNews, QA3 Financial Corp. generated $5,455,000 in commissions from the sale of TICs from DBSI. As reported in the Jan. 23 InvestmentNews article, QA3 hinted last year that it may be facing bankruptcy due to a dispute with its insurance carrier, Catlin Specialty Insurance Co., over liability and legal fees related to QA3’s sale of high-risk private placements. The FINRA award is an “interim” award, which means FINRA will retain jurisdiction over the claim for up to 180 days while the transactions between QA3 and the couple are unwound and analyzed. About our law firm: The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All our cases are handled on a contingency fee and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

Texas Couple Wins Arbitration Award From Raymond James & Associates

On August 25, 2010, a FINRA arbitration panel ordered Raymond James & Associates and one of the firm's brokers to buy back $1.4 million in auction-rate securities from a Texas couple for $925,000.
 
The $925,00 award was less than the $1.4 million originally requested in the claim, a fact that one arbitration panelist disagreed with. The investors claimed breach of fiduciary duty, misrepresentation and fraud, according to the Newswire.

"I believe the award to the Glendennings should be $1,400,000 instead of $925,000," wrote the dissenting arbitrator.

The couple's broker, Larry Milton, was informed that the couple wished to invest in certificates of deposit. Instead, Milton invested the couple's money in auction-rate securities consisting of sewer revenue bonds.
This is the second ruling against Raymond James in less than six weeks. On July 19, the firm was ordered to buy back $2.5 million in auction-rate securities from investor Greg Merdinger.

About our law firm:

The law firm of David P. Meyer & Associates represents individuals who have been harmed by investment fraud. Contact us toll-free at 1.866.827.6537 for more information.

FINRA Decides to Extend Pilot Arbitration Program into 2011

Two weeks ago, FINRA decided to extend a pilot program that gave investors involved in arbitration proceedings the right to opt for an arbitration panel without an industry-affiliated arbitrator, according to a July 21 Wall Street Journal article. Standard arbitration cases are heard before a three-arbitrator panel, typically with two "public arbitrators" and one securities-industry-affiliated arbitrator.

FINRA Proposes Eliminating “Inability-to-Pay” Defense

The Financial Industry Regulatory Authority (FINRA) recently proposed a change to FINRA Rule 9554 which would eliminate the “inability-to-pay” defense in customer arbitration cases. The “inability-to-pay” defense frustrates a customer’s efforts to collect on an arbitration award in their favor. The purpose of the rule change is to increase the probability that customers will be paid by FINRA members or associated persons. Under FINRA rules, once an arbitration award has been issued by the arbitration panel, a member or associated person has thirty days in which to pay the award. Failure to timely pay results in FINRA initiating an expedited proceeding against the member or associated person. A member or associated person may be suspended if they either fail to pay the award or fail to request a hearing before FINRA. If a member requests a hearing, one of the defenses available to prevent a suspension is establishing a bona fide inability-to-pay the award. If the member or associated person demonstrates an inability-to-pay, they will not be suspended and the customer is precluded from collecting on the arbitration award. FINRA lacks subpoena power over banks and other third parties which makes it difficult for FINRA to accurately assess a member or associated persons financial condition and true inability to pay an award, and means that the “inability-to-pay” defense may sometimes be abused. By eliminating the “inability-to-pay” defense, FINRA hopes to increase the payment of awards, or at least prompt settlement discussions between the parties, in furtherance of its goal of protecting investors. The proposal has been submitted to the Securities and Exchange Commission for approval. You can read the text of the proposed rule here.

FINRA Proposed Rule Change Would Expand Arbitrator Selection Lists

The Financial Industry Regulatory Authority (FINRA) recently proposed a change to the way arbitration panels are ranked and selected. The proposal would amend FINRA Rules 12403 and 12404 of the Code of Arbitration Procedure for Customer Disputes to increase the number of arbitrators on each list generated by the Neutral List Selection System.

FINRA Considering Change to Arbitration Panel Composition

Recent comments by Richard Ketchum, Chairman and Chief Executive of the Financial Industry Regulatory Authority (“FINRA”), suggest that FINRA may be moving toward allowing investors to choose to have an all public panel hear their dispute.