BBVA Sanctioned For Discovery Abuse In FINRA Arbitration

May 2, 2013

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in July 2011, Claimant asserted causes of action including negligence, breaches of contract and fiduciary duty, fraud, conflict of interest, violations of securities rules and laws, and unsuitability in connection with his investment in Respondent BBVA's proprietary fund Puerto Rico & Global Income Target Maturity Funds, Inc

At the conclusion of the hearing, Claimant Shah requested $1,145,000 in loss of principal minus the value of securities liquidated in his account, for a net of $674,000 plus interest (preferably about $229,000 in interest), costs, fees, and punitive damages of twice the compensatory damages.  In the Matter of the FINRA Arbitration Between Purnima Dilip Shah, Claimant, v. BBVA Securities of Puerto Rico, Inc., Respondent (FINRA Arbitration 11-02677, April 20, 2013).

Respondent BBVA generally denied the allegations and asserted various affirmative defenses. 


During the evidentiary hearing. Claimant Shah twice moved to sanction Respondent BBVA for its alleged failure to comply with the Panel's prior discovery order as to production of documents. Specifically. Claimant requested that Respondent's defenses be stricken and that Respondent be ordered to pay sanctions in the amount of $100,000.00, of which $50,000.00 represented attorneys' fees. Respondent countered that Claimant had not been prejudiced by any of the alleged conduct. The Panel denied Claimant's request to strike Respondent's defenses, but granted Claimant's request for sanctions. 


The FINRA Arbitration Panel found that Respondent BBVA was liable on the claims of conflict of interest and violation of FINRA rules, and ordered the firm to pay to Claimant:
  • $121,330.00 in  compensatory damages; 
  • 4.25% pre-judgment interest from December 2008;
  • post-judgment interest; 
  • $375 reimbursed filing fee; and
  • $100,000 as a sanction for its failure to produce documents (of which $50,000.00 represents attorneys' fees).
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