a customer complaint and an arbitration in which customers complained regarding the callable nature of their Certificates of Deposit ("CDs") and Fixed Income Deposits ("FIDs") (Occurrence No. 1213532) and another customer complained regarding the suitability of the investments in her IRA account (Occurrence No. 1487495).
As to Occurrence No. 1213532:According to the testimony this occurrence involves two different clients. The first are the customers from Occurrence No. 1213532 - after several years of investing in CDs and FIDs, these customers raised a complaint with Respondent regarding their misunderstanding about the callable nature of their CD accounts. The customers had invested in callable CDs before transferring their account to Respondent and working with Claimant. Respondent investigated the internal complaint. Claimant participated in the investigation along with document review. Respondent determined that there was no liability to the firm or to Claimant and denied the customers' complaint. Based on the testimony of Claimant, she produced very detailed notes as to her conversations and interactions with the customers. There were notations as to informing the customer that the "issuer" made the decision as to the date to redeem, not the investor or Respondent or Claimant. After Respondent denied their complaint, the customers did not pursue the matter further and did not initiate any litigation or arbitration against Claimant or Respondent. The customers did transfer their accounts to another firm in the form of a self-directed account. This testimony was not refuted. There was no payment or settlement. The uncontroverted testimony was that the claim was false and clearly erroneous.As to Occurrence No. 1487495:The second customer complaint involved the customer from Occurrence No. 1487495. This customer filed a Statement of Claim with FINRA against Respondent only. Claimant testified she was not named in the arbitration and had nothing to do with any settlement, award or payment. The customer was retiring from Bell South and wanted to make her investments last through retirement. In 2007, Claimant met and spoke extensively with the customer and created four different allocation proposals, which were all reviewed with the customer. The customer finally agreed to a plan that Claimant proposed and she began to set up the accounts. Eventually, the customer filed a Statement of Claim with FINRA (Case No. 09-06370) against Respondent claiming breach of fiduciary duty, breach of contract, unsuitability, negligence and gross negligence, fraud and failure to supervise. Claimant testified as to her many conversations with the customer as referred to in her notes, about the hysteria of the customer after watching television and reading about the market crisis. Claimant's notes reflect that the customer was hysterical and yelling at times during their conversations. There were notes and testimony that the customer did not remember conversations. The customer executed a Fund Solution Agreement in May 2008 and her funds were invested based on the allocation plan agreed upon. The customer had an "auto-rebalancing" feature in her account which was designed to protect her accounts. Claimant testified that a form was sent to the customer several times to remove or change the "auto rebalance" feature which the customer did not return. The customer's accounts were serviced based on her wishes and income requirements and instructions. The customer received various documents as to her investments and the strategies and was informed of the risks associated and involved.The customer did file an arbitration with FINRA against Morgan Stanley only. Claimant testified she was not named in the arbitration and had nothing to do with any settlement, award or payment. The Arbitrator did review the public Award, which does not mention Claimant. The Statement of Claim was for compensatory damages, return of fees and punitive damages. The Award was for a small amount based on the amount demanded. The Panel in the Award did not mention Claimant or any other Morgan Stanley employee and did not refer Claimant or any other Morgan Stanley employee for any disciplinary matter. There are no specifics as to the finding of the Panel in the Award. The market crash -- financial crisis in 2008 -- was not the fault or cause of anything done by Claimant. Unprofitability of an account does not make it unsuitable. The uncontroverted testimony was that the claim was false and clearly erroneous.The testimony, documents reviewed by the arbitrator and the argument of counsel demonstrate that Claimant has met the burden of proving that the Petition for Expungement is granted based on FINRA Rule 2080(b)(1)(A) and (C).
compensatory damages of at least $179,000.00, return of fees of approximately $11,400.00, well managed portfolio damages, punitive damages of $571,200.00, pre-award interest, costs, . . .
Respondent is liable for failure to supervise and suitability and shall pay to Claimant compensatory damages in the sum of $75,000.00, pre-judgment interest specifically excluded.Respondent is liable and shall pay to Claimant expert witness fees in the sum of $3,750.00.Respondent is liable and shall pay to Claimant the sum of $375.00 representing reimbursement of the non-refundable portion of the claim filing fee previously paid by Claimant to FINRA Dispute Resolution.
[T]he Arbitrator did review the public Award, which does not mention Claimant. The Statement of Claim was for compensatory damages, return of fees and punitive damages. The Award was for a small amount based on the amount demanded. The Panel in the Award did not mention Claimant or any other Morgan Stanley employee and did not refer Claimant or any other Morgan Stanley employee for any disciplinary matter. . . .
The uncontroverted testimony was that the claim [Escandon's] was false and clearly erroneous.