According to a recent Investment News article, several large arbitration awards have been handed down by FINRA arbitration panels in the past 30 days.
Three rulings over an eleven day period totaled approximately $25 million dollars and observers say more large cases are expected to be filed and decided.
The FINRA arbitration decisions included a $11.5 million award to former “I Dream of Genie” and “Dallas” star Larry Hagman against Citigroup Global Markets (Morgan Stanley Smith Barney) and a $9.2 million decision against Morgan Keegan resulting from the marketing and sale of its RMK bond funds.
Observers say the number and amount of awards should not be surprising given the epic collapse of the stock and credit markets in 2008 as well as the proliferation of subprime mortgage related structured products and notes tied to Lehman Brothers which filed for bankruptcy protection on September 15, 2008. There was also a proliferation of direct investments sold to retail investors including DBSI Holdings and Medical Capital. Both companies are subject of federal investigation and class action litigation. DBSI filed for bankruptcy protection last year and Medical Capital has been accused of being a ponzi scheme and is in receivership. Most observers expect the recent trend in arbitration awards to continue.
Of course the award may not be the last chapter in a securities case. Although arbitration awards are supposed to be binding, there are limited basis on which an appeal may be filed. For instance, according to a Morgan Keegan spokesman, the firm recently filed a motion to vacate the $9.2 million dollar RMK bond fund award on the basis the arbitrators exceeded their authority and entertained improper claims.
A three-person FINRA panel ruled Sept. 27 that Lincoln Financial Advisers was “negligent in not preventing” the actions of one of their registered representatives who raised money from Lincoln clients for investments in outside concerns. This is known in the industry as selling away is brokers’ offering a product to clients without the broker-dealer’s knowledge or approval.
The attorney’s at Colling Gilbert Wright & Carter are currently filing FINRA arbitration claims involving Morgan Keegan Bond Funds, Lehman Brothers Bonds and UBS Structured Notes (PPNs), selling away and unsuitable investments. Please contact us for a free case evaluation.