July 20, 2017
From 1946 to 1964 some 74 million Baby Boomers were born. Although Millenials and Generation Xers are in the process of over-taking the ever-dwindling) numbers of Baby Boomers, that post-War generation still constitutes a large percentage of the population. Notably, it is projected that by 2035, adults 65 and older will outnumber children for the first time in United States history. In digesting those shifting population demographics, we must be mindful that elder abuse continues to rear its ugly head on Wall Street as aging Baby Boomers are projected to remain a significant portion of the overall population for many years. In a recent FINRA arbitration case, among the allegations is one of elder financial abuse. Read how the arbitrators wrestled with the issues and ultimately issued their award.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in March 2016 and as amended thereafter, public customer Claimants asserted violations of state and federal securities laws and FINRA/SEC Rules; breach of fiduciary duty; unsuitable recommendations; failure to supervise; constructive fraud, common law fraud and fraud by material misrepresentations/omissions; unjust enrichment; unauthorized trading; and elder financial abuse. The causes of action relate to Claimants' investment in long-term municipal bonds and structured certificate of deposits. Claimants sought $247,000 in general/compensatory damages, punitive damages, disgorgement of commissions/fees; cost, interest, attorneys' fees. In the Matter of the FINRA Arbitration Between Agatha Dancy, individually and on behalf of her husband John Dancy, Claimants, vs. Wedbush Securities Inc., Respondent/ Cross-Respondent and Mark Fred Augusta, Respondent/ Cross-Claimant (FINRA Arbitration 16-00847, July 13, 2017).
Respondent Wedbush and Respondent Augusta generally denied the allegations and asserted various defenses and affirmative defenses. Additionally, Respondent Augusta filed a Cross-Claim against Wedbush seeking indemnity and contribution.
Elder Abuse and Unauthorized Trading
The FINRA Arbitration Panel found that Respondent Wedbush and Respondent Augusta had subjected Claimants to elder abuse and that they permitted unauthorized trading in the Claimants' account. Notwithstanding that finding of both respondents engaging in misconduct, the Panel granted Cross-Claimant Augusta's request for indemnification.
Accordingly, the Panel found Respondent Wedbush solely liable and ordered it to pay to the Claimants:
- $250,000.00 in compensatory damages;
- $110,000.00 in commission disgorgement;
- Interest in the amounts of $35,069.00 for compensatory damages and $15,430.00 for commission disgorgement.
- $1,080,000.00 in punitive damages pursuant to California Elder Abuse and Adult Civil Protective Act, Welfare and Institutions Code Section 15600 et seq.;
- $277,691.00 in attorneys' fees pursuant to California Welfare & Institutions Code Section 15657.1; and
- $28,864.00 in costs.
Although the FINRA Arbitration Panel awarded Cross-Claimant Augusta $110,000.00 in attorneys' fees and costs, the arbitrators admonished that:
[A]s a result of Augusta's improper conduct, the Panel subtracts the commissions that he received, plus interest, in the amount of $50,172.00. Therefore, Wedbush is liable for and shall pay Augusta the net sum of $59,828.00 in attorneys fees and costs pursuant to Lab. Code Section 2802.
Bill Singer's Comment
From my perspective, a nearly text-book perfect FINRA Arbitration Decision replete with sufficient content and context and a compelling rationale. I also appreciate the nature of the deliberations that resulted in subtracting Augusta's commissions with interest as part of the arbitrators' effort to fashion an appropriate indemnification/contribution award on his Counter-Claim against Wedbush. Compliments to these arbitrators.
According to online FINRA BrokerCheck records as of July 20, 2017, Augusta was first registered in 1986. Under the heading "Employment Separation After Allegations" is the disclosure by Webush that Augusta had voluntarily resigned on May 27, 2015, based upon allegations that:
REGISTERED REPRESENTATIVE RESIGNED AS A CUSTOMER COMPLAINT WAS FILED AGAINST HIM.
Under the heading "Customer Dispute - Award/Judgment" are three disclosed items with NASD arbitration awards for the following years:
Under the heading "Customer Dispute - Settled" are two reported matters involving a 2016 settlement for $150, and a 2000 settlement for $4,000.
2002: $168,400 (no contribution from Augusta) and $833,125 (no contribution from Augusta)
Under the heading "Customer Dispute - Closed-No Action / Withdrawn/Dismissed/Denied" are seven disclosures.
Under the heading "Customer Dispute - Pending" are three disclosures involving alleged damages of $33,648 (June 2017); $247,000 (May 2015/arbitration pending); and $40,000 (September 2000).
READ the BrokeAndBroker.com Blog "Elderly" Archive