FINRA Arbitrator Gets By With A Little Help of A Friend

November 30, 2017

Another day and another lawsuit over a variable annuity. In today's offering, we have an interesting wrinkle involving a minor who was named as the beneficiary of a VA and a registered representative who may not have timely submitted the paperwork to effectuate the beneficiary designation. Frankly, it's not really clear as to why a lawsuit was even needed to resolve the dispute but, hey, I'm a lawyer and, you know, what good is being a lawyer if folks don't have to pay for my services?

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed June 2016, Claimants asserted negligence and breach of contract. As set forth in the FINRA Arbitration Decision:

unnamed party Mr. C, the owner of a variable annuity with MetLife Investors USA Insurance, timely designated April Lynne Barnes as the beneficiary to the annuity
prior to passing away, and that Kozuki (who sold the annuity to unnamed party Mr. C)
failed to properly and expeditiously change the beneficiary to the annuity to April Lynne Barnes.

Claimants sought $100,000, attorneys' fee, and costs. In the Matter of the Arbitration Between James E. Barnes as next friend for April Lynne Barnes and April Lynne Barnes, Claimants, v. Stifel, Nicolaus & Co., Inc. and Marc Yukio Kozuki, Respondents (FINRA Arbitration 16-01680, November 24, 2017).

Respondents generally denied the allegations and asserted various affirmative defenses. Respondent Kozuki sought an expungement recommendation of Claimants' claims from his Central Registration Depository records ("CRD").

You Got A Friend

According to the FINRA Arbitration caption, James E. Barnes acted "as next friend" Claimant for April Lynne Barnes, who is also named in her own right as a second Claimant. Typically, an individual acting in a "next friend" capacity is not deemed a "party" to the lawsuit but merely serving as a vehicle by which claims are filed for the befriended individual, who is often a minor child or someone otherwise incompetent to file, manage, or participate in the subject litigation. Depending upon the jurisdiction and type of litigation, a "next friend" is sometimes referenced in the caption as a "guardian ad litem."

Waiting on a Friend

The FINRA Arbitration Decision asserts that April Lynne Barnes is a minor and her father, James E. Barnes, holds a General Durable Power of Attorney executed by the unnamed party "Mr. C," who had designated the child as the beneficiary of the variable annuity at issue in the arbitration. Respondents argued that neither James E. Barnes nor April Lynne Barnes have standing in the case. After considering these arguments, the sole FINRA Arbitrator found that

the only Claimant is James E. Barnes as next friend for April Lynne Barnes. Therefore, James E. Barnes as next friend for April Lynne Barnes is hereinafter referred to as "Claimant."


The sole FINRA Arbitrator found Respondents Stifel and Kozuki joint and severally liable to Claimant for $90,000 in compensatory damages and $225 reimbursement for the initial filing fee.

The sole FINRA Arbitrator denied Respondent Kozuki's requested CRD expungement.

Bill Singer's Comment

Ummm . . . the reason that April Lynne Barnes had to file a lawsuit was what??? Admittedly there ain't much in the way of facts presented in the FINRA Arbitration Decision but, then again, there doesn't appear to be a need to present all that much beyond the allegation that Mr. C had instructed Respondent Kozuki to change a previously designated beneficiary for the VA to April Lynne Barnes and that the change was not timely made. Unfortunately the FINRA Arbitration Decision doesn't present us with the pertinent dates for the requested beneficiary change or Respondents' explanation as to why they didn't accomplish the change before Mr. C's death. Whatever the explanations, we might safely infer from the Arbitrator's award that there was some negligence or breach of contract. All that being said, I'm not quite sure as to why Stifel, Nicolaus didn't settle the claims on an expeditious basis but there are many reasons that prompt folks and firms to engage in litigation.

READ the Securities and Exchange Commission's Office of Investor Education and Advocacy's online publications: