A U.S. arbitration panel has ordered over US$700,000 in damages against RBC Capital Markets LLC, including US$250,000 in punitive damages.
A Financial Industry Regulatory Authority (FINRA) arbitration panel ordered the firm to pay damages to a Florida couple that sought between US$500,000 and US$1 million in compensation over allegations of breach of fiduciary duty, negligence, fraud and breach of contract. The firm denied the allegations, and asked the panel to dismiss the claim entirely. The panel sided with the clients, ordering compensatory damages for several different investments, plus interest, and punitive damages for “intentional misconduct and gross negligence”.
In particular, it found that “the respondent falsified the customer questionnaire as to the risk level that the customer had agreed to and misrepresented that the U.S. government would not allow Lehman Brothers to fail.” The case included over US$150,000 in damages for purchases of Lehman preferred stock.
“This is a very significant verdict, as it is very rare that a FINRA arbitration panel awards punitive damages. Here, the broker admitted that he told my clients that the government would not allow Lehman Brothers to fail, as part of his pitch to sell Lehman Brothpers referred stock as a safe investment,” said the clients’ attorney, Jeffrey Erez, of Ft. Lauderdale, Fla.-based firm, Sonn & Erez PLC.
“He also admitted that the customer questionnaire wrongly noted that my clients had high tolerance for risk, when in fact they were conservative. I was shocked that the financial advisor was so candid, as most advisors, in my experience, refuse to ever admit to any misconduct in FINRA arbitrations,” added Erez.
“We think that FINRA arbitrators, like this panel, should award punitive damages when they see reckless or intentional misconduct, to send a message that such misconduct will not be tolerated,” added Jeffrey Sonn.