We are pleased to report a victory for one of our national broker-dealer clients in a recent decision by a panel of FINRA arbitrators in Los Angeles. Gordon Young and Graham Douds of Barr & Young arbitrated the case.
In a rare 10-page reasoned opinion, the panel of three public arbitrators denied all claims alleged by Claimants in their Statement of Claim. Claimants, who were represented by one of the foremost public investor law firm’s in the country, had originally sought damages of more than $271,593 (later reduced to $113,640 at the arbitration hearing) for alleged misrepresentation and unsuitability related to their investments in Fannie Mae and Freddie Mac preferred stock in 2007 and 2008. The panel concluded its reasoning by echoing the defense themes of the case, stating:
Based on the findings above, we conclude that neither Respondent nor its agents . . . was guilty of any act(s) of wrongdoing with respect to the Fannie and Freddie Preferreds about which [Claimant] complains in this action. [Claimant] himself decided to purchase Fannie Preferred in his account before [Broker] even mentioned the security in their conversations. [Claimant] knew and understood that preferred stocks were “riskier” than bonds and other more secure debt instruments from his years of investing in fixed income obligations.
Moreover, [Broker] did not misrepresent or omit to state any matter with respect to the Fannie or Freddie Preferreds. He simply provided [Claimant] with precisely the same information that the overall financial markets knew and understood about Fannie and Freddie. To this extent, he could not have breached any duty [Respondent] may have owed to [Claimant] regardless of [Claimant’s] admitted status as a self-directed investor. Neither did [Broker’s] conduct run afoul of any FINRA Conduct or NYSE Board Rule. And neither, in light of [Claimant’s] stated knowledge, experience, investment goals and portfolio make up, was his investment in Fannie and Freddie Preferreds unsuitable.
In short, [Claimant] was a victim of a market that very few people ever anticipated.
In reaching its decision, the panel found that the claims were “clearly erroneous” and “false” as they related to the two licensed brokers who were named in the claim. As a result, the panel recommended that any references to this claim be expunged by the regulators from the individuals’ BrokerCheck records.