FINRA Arbitrator Says Customers' Claims Are Baseless in Win for Industry Respondents

November 24, 2021

Two Wall Street professionals were accused by two customers of having engaged in some seven years of account mismanagement. The two industry reps denied the customers' allegations, climbed into the old FINRA arbitration ring, went the distance, and emerged victorious -- a tad bloody and battered for their efforts but still standing.

Case in Point

In a FINRA Arbitration Statement of Claim filed in December 2018 and as amended, public customer Claimants the Benabous asserted breach of fiduciary duty, failure to supervise, and respondeat superior. Ultimately, Claimants sought $35,000 in compensatory damages, interest, fees, and costs. The Claimants represented themselves pro se. In the Matter of the Arbitration Between Raphael Benabou and Donna Benabou, Claimants, v.  Ameriprise Financial Services, LLC,  Robert Nicholas Korzik, and James M. Korzik, Respondents (FINRA Arbitration Award 18-04341)
https://www.finra.org/sites/default/files/aao_documents/18-04341.pdf

Respondents generally denied the claims, asserted affirmative defenses, and sought the expungement of the matter from the Korziks Central Registration Depository record ("CRD").

Award

The sole FINRA Arbitrator denied Claimants' claims.

Expungement

In recommending the expungement of the Korziks' CRD, the Arbitrator made a FINRA Rule 2080 finding that the Claimants claim, allegation, or information is factually impossible or clearly erroneous, or false. The Arbitrator offered the following rationale:

The Korzik Respondents gave testimonies under oath at the expungement hearing supporting their request for expungement. Claimant Raphael Benabou appeared at the hearing but gave no testimony under oath. Though Claimants made a very lengthy submission on the merits, they provided no affidavits. Respondents provided affidavits in support of their contentions, which the Arbitrator found persuasive. One of their key points was that Claimants made money on their account. At the hearing, Claimant Raphael Benabou conceded that he suffered no economic damage as a result of the conduct he was complaining about and that he did not object to the expungement. 

The Arbitrator concluded that Claimants' statements lacked credibility and found their claims baseless.

Bill Singer's Comment

Other than the mere naming of the Claimants' causes of action, we know virtually nothing about their grievances from the sparse fact pattern in the FINRA Arbitration Award. Online FINRA BrokerCheck disclosures as of November 24, 2021, present this about the Claimants allegations:

CLAIMANTS CLAIMED THAT THE INDIVIDUAL RESPONDENTS BREACHED THEIR FIDUCIARY DUTY RELATED TO THE MANAGEMENT OF CLAIMANTS' ACCOUNTS BETWEEN 2011 THROUGH 2018, ALLEGING THAT CLAIMANTS ACCOUNTS WERE NOT APPROPRIATELY DIVERSIFIED, THAT THE ACCOUNTS WERE NOT APPROPRIATELY MONITORED, AND THAT ONE OR BOTH OF THE INDIVIDUAL RESPONDENTS ENGAGED IN AUTHORIZED [sic] TRADING

According to the sole FINRA Arbitrator, the Claimants' "statements lacked credibility" and, as such, the Arbitrator found their claims to be "baseless." As far as characterizations go, "baseless" is about as negative a conclusion as any trier-of-fact can make. Further, in contrast to "baseless," the Arbitrator found the Korziks' testimony and evidence to be "persuasive." On top of that, the Korziks testified under oath, whereas Claimants did not testify. Finally, it's tough to overlook this somewhat jarring concession that "Claimant Raphael Benabou conceded that he suffered no economic damage as a result of the conduct he was complaining about . . ." Of course, I'm still puzzled by the allegation on BrokerCheck that the "RESPONDENTS ENGAGED IN AUTHORIZED TRADING." Omigod, how terrible!

I fully appreciate that many lawsuits are not about mere economic damage, so let's not go down that road. Given the Arbitrator's harsh words about Claimants' allegations and the recommended expungement, it seems that the Korziks were victimized. As such, this Award is a vindication of their cited conduct and the restoration of their professional reputations. 

  


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