If you've been a stockbroker long enough, it's likely that some customer will file a lawsuit against you and your firm. Frankly, you may have screwed up and, in all fairness, you should be named as a defendant or respondent. There are times, however, when you may be outraged -- I really, really, really didn't do anything wrong! Do you have an alternative to taking the slaps in the face and turning the other cheek? The BrokeAndBroker Blog examines one recent FINRA arbitration in which a named stockbroker not only denied the customer's charges but filed a counterclaim.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in April 2013, public customer claimants Charles and Frances Prignano alleged breach of fiduciary duty, negligence, and violation of FINRA rules in connection with purportedly unauthorized trades by Respondent Pacitto in the Claimants' E*TRADE account. Unspecified damages, fees, interest, and costs were sought. In the Matter of the FINRA Arbitration Between Charies M. Prignano and Frances P. Prignano, Claimants/Counter-Respondents, vs. T. Rowe Price Investment Services, Inc., Respondent -and- Michele Pacitto, Jr., Respondents/Counter-Claimants (FINRA Arbitration 13-00969, July 21, 2014)
Respondents T. Rowe Price and Pacitto generally denied the allegations and asserted various affirmative defenses.
Respondent Pacitto counterclaimed against the Claimants and sought unspecified damages (including punitive damages), interest, fees, and costs in connection with his assertions of abuse of process, intentional interference with employment, intentional interference with prospective business advantage, and extreme and outrageous conduct causing emotional distress. Further, Pacitto sought an expungement of the arbitration from his Central Registration Depository record ("CRD"). Underscoring the testiness of this case, the FINRA Arbitration Decision asserts that Pacitto alleged that:
[C]laimants' claims were asserted to shift financial responsibility from Claimants' own investment decisions, and to punish Respondent Pacitto and his family for alleged unwelcomed social encounters.
Online FINRA Records
Online FINRA records as of July 25, 2014, indicate that Pacitto was "Discharged" by T. Rowe Price on April 23, 2013, based upon allegations that:
INDIVIDUAL PERFORMED ACTIVITIES THAT WERE OUTSIDE THE SCOPE OF HIS EMPLOYMENT AND THE FIRM'S POLICY BY PROVIDING AN INVESTOR WITH FINANCIAL ADVICE.
Those same online FINRA records reference the Prignanos' arbitration and suggest the "Alleged Damages" were $75,000.
On March 25, 2014, Claimants filed a Notice of Dismissal of Respondent T. Rowe Price Investment Services, Inc.
The FINRA Arbitration Panel denied all claims by Claimants.
The Panel found Claimant Charles Prignano liable and ordered him to pay to Respondent Pacitto:
SIDE BAR: Colo. Rev. Stat. §13-21-102. Exemplary damages.
(1) (a) In all civil actions in which damages are assessed by a jury for a wrong done to the person or to personal or real property, and the injury complained of is attended by circumstances of fraud, malice, or willful and wanton conduct, the jury, in addition to the actual damages sustained by such party, may award him reasonable exemplary damages. The amount of such reasonable exemplary damages shall not exceed an amount which is equal to the amount of the actual damages awarded to the injured party. . .
Finally, the Panel recommended the expungement of the arbitration from Respondent Pacitto's CRD based upon its findings that:
Bill Singer's Comment
The allegations were clearly erroneous. For example, the Statement of Claim alleged that the trading in the E*TRADE accounts of the Claimants was done without the Claimants' permission or knowledge. That was one of many clearly erroneous allegations. Indeed, all of the trades were either made by Claimant Charies M. Prignano, or with the consent and knowledge of Claimant Charies M. Prignano.
The registered person. Respondent Pacitto, was not involved in an alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds. The trades complained of were all made by Claimant Charies M. Prignano himself, contrary to the allegations in the Statement of Claim. All of the other trades addressed in the arbitration, were either made by Claimant Charles M. Prignano himself, or with the consent and knowledge of Claimant Charies M. Prignano. . .