Claimants alleged Respondent and its unnamed registered representative had recommended an unsuitable investment and trading strategy. The Claimants described that strategy as constituting an unsuitable asset allocation because it was overly aggressive and invested them in speculative stocks and naked put options, and utilized a high degree of margin. Moreover, Claimants alleged that Respondent Wells Fargo’s liquidation of their positions in response to margin calls destroyed their savings, for which they now lacked the means of restoring.
Respondent Wells Fargo generally denied the allegations and asserted various affirmative defenses.
And The Verdict Is . . .
The FINRA Arbitration Panel found Respondent Wells Fargo Advisors liable and ordered it to pay to Claimants $153,000 in compensatory damages.
SIDE BAR: If you’re a frequent reader of “Street Sweeper,” then you likely know what’s coming – you know the drill.
Grrrrr . . . why does FINRA continue to titillate us with just enough facts about its arbitration cases to interest us but then delivers too little rationale to explain the decision?
- How did the Claimants come up with that $425,000 number?
- Was it a reasonable calculation or did the Arbitrators perform their own calculation and compute “$153,000?”
Why are those questions important?
For starters, the answers would let us know whether the Claimants or Respondent won this case.
If the Claimants’ losses were truly $425,000 but the Arbitrators only awarded $153,000, then Wells Fargo may well have come away a winner, relatively speaking – especially if the Claimants were demanding in excess of the awarded damages as their last, best, final offer of settlement.
On the other hand, if the actual “nest egg” was really $153,000 and the Claimants’ sort of padded their damages, then the decision may not be a loss for them. As with many cases, the Claimants may have reached for the moon but grasped our home planet. You file that under “no harm trying.”
Sure, at the end of the day, the ruling is what it is. However, beyond the mere process of adjudicating these claims, FINRA should make more of an effort to provide context and a meaningful explanation of its rulings.
If you missed Bill Singer's commentary about the developing AIG lawsuits on National Public Radio's "Marketplace", you can listen here: