In what is believed to be one of the first rulings of its kind, a 95-year old California man received $1.6 million dollar award from a Financial Industry Regulatory Authority arbitration Panel against an on-line brokerage firm finding, among the offenses, elder abuse. The California elder abuse statue, like many similar state statutes (including Florida), allows for treble damages in instances where there is a finding of elder abuse. However, the courts have normally applied this statute in the caretaker relationship wherein a caregiver takes advantage of an elderly and doe not apply in the financial investor/investment advisor relationship. This ruling could send chills throughout the brokerage community as so many claims of negligence and fraud stem from losses suffered by elders and retirees.
Excerpts from the January 5, 2010 Investment News article appear below:
In a rarity, an arbitrator last month cited elder abuse in tripling the damages a discount securities firm must pay a 95-year-old client.
A Financial Industry Regulatory Authority panel awarded the elderly investor, David Wolfson, $1.6 million in a case involving StockCross Financial Services Inc. of Beverley Hills, Calif. Mr. Wolfson accused StockCross, along with two of its brokers, of misconduct and self dealing. He claimed the brokers recommended and solicited unsuitable and overly risky investments that were actively traded on margin.
The claim, which was filed in March, also alleged that StockCross and the two brokers, Thomas B. Cooper and Peter L. Boorn, put Mr. Wolfson’s home at risk. According to the complaint, they “encouraged and invited Mr. Wolfson to leverage the equity in his home with a reverse-mortgage transaction to utilize as investment capital.”
While many arbitration claims charge elder abuse, it is extremely rare for Finra panel to cite such abuse in an award, said David Liebrader, an attorney that represents both investors and brokers against securities firm. Under California law, elder abuse entitles plaintiffs triple the damages.
According to the complaint, Mr. Wolfson was a client of Mr. Cooper for almost 20 years, when Mr. Cooper dropped the account in 2008.
A footnote to the lawsuit alleged that Mr. Cooper “quit because he had bilked nearly all of Mr. Wolfson’s assets—including the equity in his home, all his cash reserves, all his emergency/medical cash reserves and even the insurance money Mr. Wolfson received to replace his automobile—and there was nothing left to churn.”
The arbitrators awarded Mr. Wolfson $320,000 in compensatory damages and $960,000 in damages for elder abuse. They also awarded the 95-year-old $234,000 in legal fees, expert witness fees of $62,000, various costs of $21,000 and $10,000 as sanctions for failing to follow discovery orders.
StockCross and the brokers will fight the decision and file a motion to vacate, said Martin H. Kaplan, the attorney filing the motion. Such motions to vacate are essentially court appeals of Finra arbitration awards, which are very difficult to overturn.
The attorneys at Colling, Gilbert, Wright & Carter are currently representing numerous retirees in actions against their former brokerage firms and insurance providers and have recovered losses for elders and retirees throughout the United States. If you believe you or someone you know has been taken advantage of by their investment advisor, please contact our firm for a free consultation.