FINRA Arbitration

Published on: August 10, 2011

FINRA ORDERS UNITS OF MERRIL LYNCH TO PAY $8.1 MILLION

Recent Financial Industry Regulatory Authority (FINRA) securities arbitration resulted in the order for units of Merrill Lynch to pay compensatory damages to Staton Family Investments Inc. totaling $8.1 million for breach of fiduciary duty. Staton Family Investments and Daniel Staton accused Merrill Lynch of securities fraud, negligence, breach of contract and common stock theft. According to the claimants, 1,260,000 shares of Duke Realty Corp. common stock were stolen from their accounts.

Finra Orders Units of Merril Lynch to Pay $8.1 Million

Daniel Staton was found to not be personally affected, so he was dismissed as a claimant. When the claim was filed in December 2008, claimants requested more than $1 billion in restitution: $900 million in treble damages or 1,260,000 shares of the aforementioned stock, $300 million in compensatory damages, $50 million for punitive damages and other costs including attorneys’ fees.

The alleged wrongdoing occurred, according to the claimants' lawyer, when Merrill Lynch failed to make Staton Family Investments adequately aware of the terms of certain trigger prices that could possibly reduce the value of Duke Realty’s stock to nothing. Around the time the stock dipped below the trigger price, another $4 million was requested from the family company by Merrill Lynch, while still not notifying them of how undercollateralized the loan was. Though Merrill Lynch only requested $4 million, the money they actually owed amounted to $23 million.

Published on: April 7, 2009

ALBANY, NEW YORK FINRA ARBITRATION PANEL ISSUES $39.8 MILLION AWARD IN FAVOR OF INSTITUTIONAL INVESTOR

by InvestorLawyers

Merrill Lynch & Co. must pay an investor $39.8 million in compensatory damages because of negligence on the part of one a subsidiary broker-dealer, an Albany, New York FINRA arbitration panel has ruled. The FINRA panel issued the award to Trustees of the Masonic Hall & Asylum Fund, which is an endowment for an Utica health-care facility. The award is significant because it represents one of the largest arbitration awards in favor of an investor issued by FINRA or its predecessors, the National Association of Securities Dealers and New York Stock Exchange Regulation.

The fund’s arbitration claim had accused Merrill Lynch and subsidiary Advest Inc. of misrepresentation, negligence, breach of fiduciary duty, and breach of contract. The claim had also accused Advest Inc. of encouraging it to buy into Sphinx Managed Futures Index Fund LP, which was owned by Refco Inc. However, Refco Inc. collapsed in 2005 after giving notice that its chief executive had concealed bad debts valued at about $430 million from firm auditors. The fund alleged that it lost money because of Advest Inc.’s poor recommendation.

The FINRA panel awarded the fund $30.6 million plus $9.2 in interest from as far back as November 2005. The full award can be accessed below.

Published on: March 3, 2009

FINRA Raises Limit For Damages Claimed In Cases To Be Heard By A Single Arbitrator To $100,000

by InvestorLawyers

Beginning March 30, 2009 investors claiming losses of up to $100,000 will have the option of proceeding before a single arbitrator rather than a panel of three arbitrators. The SEC has approved the final rule change (see full Notice, accessible immediately below).

While any final conclusion concerning whether the rule change will prove beneficial to investors must await experience arbitrating under the new rule, two possible benefits to investors immediately come to mind: 1) The new rule permits investors with claims for less than $100,000 to proceed before a single public arbitrator rather than a panel of three, one of whom is a current or former employee of a brokerage firm; and 2) costs for hearing sessions, a substantial portion of which are comprised of honoraria for the arbitrators, will go down under the rule.

The full text of the new rule is accessible here: