As a new year begins, we like to take the opportunity to review some of the most notable securities arbitration Award statistics of the last year. First up: the largest awards of damages.
The single largest one in 2016 issued in Speer v. Morgan Stanley Smith Barney LLC, FINRA ID #13-00549 (Tampa, FL, 3/21/16), a Customer-Member dispute in which the widow of the one-time owner of the Home Shopping Network asserted allegations of churning, unauthorized trading, unsuitability and other claims in connection with her late husband’s investments in the banking and financial services sectors of the market. The claimant recovered $32,840,000 in compensatory damages and $1,547,777 in expert witness fees, for a total of $34,387,777.
Top Industry-Initiated Awards
The second largest damage award (both compensatory and in total) was assessed in the last week of the year, in BTIG LLC v. BHP International Markets Ltd., FINRA ID #14-00937 (Los Angeles, 12/27/16), which found negligent misrepresentations and omissions in the execution of a purchase order for an Indonesian security. The claimant won $16,155,451 in compensatory damages, $3,328,321 in interest and $541,001 in attorney fees and costs, for a total of slightly over $20 million, from three broker-dealers and six brokers.
Five other cases brought by broker-dealers were among the ten with the highest awards: C.L. King & Associates Inc. v. Nicklin, FINRA ID #12-02927 (NYC, 11/25/16) (recovery of a $13,097,946 debit balance in the margin account of a customer who was an investment advisor); Tullett Prebon Financial Services LLC v. Tradition Asiel Securities Inc., FINRA ID #10-03265 (NYC, 12/6/16) (a raiding case in which the claimant recovered $4,500,000 in compensatory damages, $4,508,850 in attorney fees – the largest fee amount assessed all year – and $108,228 in costs); Rochdale Securities LLC v. Pershing LLC, FINRA ID #14-01061 (NYC, 2/23/16) (a dispute between a broker-dealer and its clearing firm caused by a rogue broker’s alleged fraud scheme, which netted the claimant $5,762,993 in compensatory damages, $832,400 in attorney fees and $100,000 in expert witness fees, partially offset by a $636,876 counterclaim award); Urquhart v. VTrader Pro LLC, CBOE ID #12M003 (Chicago, 2/8/16) (a customer complaining about a margin liquidation by a clearing firm recovered $3,860,265 in compensatory damages, $360,488 in punitive damages and $1,182,205 in attorney fees); and Fayad v. UBS Financial Services, Inc., FINRA ID #15-02579 (NYC, 12/6/16) ($4,504,000 in principal and $61,871 in interest awarded in a promissory note counterclaim against two claimant brokers).
Other Top Customer Awards
The second-largest customer recovery of the year occurred in De Jesus v. UBS Financial Services Inc., FINRA ID #14-02464 (San Juan, PR, 12/5/16), a Puerto Rico bond fund case in which the Panel assessed $12,716,722 in compensatory damages, $2,517,911 in accrued interest, $3,179,180 in attorney fees (the largest such award to a customer) and $163,000 in costs, more than $18.5 million in all.
The other two customer awards among the top ten were: Montfort v. C.L. King & Associates Inc., FINRA ID #12-01987 (NYC, 6/7/16) ($10 million in compensatory damages); and Doyle v. Doyle, FINRA ID #15-01700 (Los Angeles, 6/1/16) ($6,114,857 in compensatory damages, $2,000,000 in punitive damages – the largest such award of the year, assessed upon a finding of elder abuse – and $400,000 in attorney fees and $91,742 in costs). If one only counts awards on primary claims (see Fayad counterclaim, above), Melton v. Morgan Stanley Smith Barney LLC, FINRA ID #14-00829 (Boca Raton, FL, 6/16/16) ($2,593,000 in compensatory damages and $993,989 for disgorgement of brokerages fees and commissions), would round out the top ten.
(ed: *We summarized the Speer pleadings in SAA 2016-13 and the C.L. King v. Nicklin pleadings in SAA 2016-46. **In upcoming Arb Alerts, we'll continue our statistical look-back to 2016 -- next up: top BDs, in terms of number of Awards.)
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