In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in March 2012, Claimant Gillman Family Trust alleged negligence; breach of fiduciary duty; negligent supervision; breach of contract; and, fraud in connection with the trust's investment in Fannie Mae preferred stock: FNMA PFD PERP SER S 8.25%. Claimant sought about $50,000 in compensatory damages, punitive damages, interest, costs, and rescission. In the Matter of the FINRA Arbitration Between Gillman Family Trust, Claimant vs. Wachovia Securities. LLC d/b/a Wells Fargo Advisors, LLC and Shirley Polidori, Respondents (FINRA Arbitration 12-00996, February 6, 2013).
Respondents generally denied the allegations and asserted various affirmative defenses. Respondent Polidori requested expungement of the arbitration from her Central Registration Depository record ("CRD").
The sole FINRA Arbitrator hearing this matter found Respondent Wachovia liable on the claims of negligence, negligent supervision, fraud and breach of contract (no finding of liability on breach of fiduciary duty). As a result, the Arbitrator awarded rescission against Respondent Wachovia, which was required to pay $48, 399.70 pursuant to the firm's repurchase of 1,931 shares of FNMA PFD PERP SER S 8.25%, as acquired by Claimant on April 16, April 18, and May 21, 2008.
The sole FINRA Arbitrator denied all claims asserted against Respondent Polidori and recommended the expungement of the arbitration from the registered representative's CRD. In recommending the expungement, the Arbitrator explained that:
Respondent Wachovia's liability was predicated on the manner in which it marketed Fannie Mae preferred stock to Claimant. Respondent Polidori testified that she marketed the securities in question by reference to research information provided to her by Respondent Wachovia. I was impressed by Respondent Polidori's candor, professionalism, and apparent concerns for and loyalty to her client, and believe that she marketed the securities based on the research information provided to her by her firm, and that she accurately conveyed that information to Claimant…
Kudos to this FINRA Arbitrator for attempting to explain an apparent inconsistency in awarding damages against the employing brokerage firm but exonerating the employer registered representative. Here, in a nutshell, the Arbitrator wags a finger at Wachovia for its apparently dubious marketing of the FNMA product to its customers - and the Arbitrator suggests (or we are compelled to infer) that Respondent Wachovia's salesforce was duped by the firm's research and approved recommendations during this time of toxic mortgage related products. About all that the Arbitrator seems to state about the respondent stockbroker is that she studiously conveyed Wachovia's research in accordance with what she thought - at the time and within the eye of the growing storm - was a suitable investment for her customers. The ship's compass was unknowingly haywire but the unsuspecting captain kept to what was thought a true course. I, for one, appreciate the nuance of this decision.
Also READ these FNMA "Street Sweeper" columns:
An invitation to my "Street Sweeper" readers: Recently, I hosted three episodes of " Side Bar With Bill Singer," where I interviewed industry figures about whistleblowing, international securities regulation, and high-frequency trading. Those shows are now available online and I invite you to watch them. Bill Singer.