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Arbitrators Award Damages For Misleading and Incomprehensible Trade Confirmation
Written: April 5, 2012

The Rosetta Stone of Trade Confirmations: I bought how many shares of what . . . when . . . and for how much?

In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in January 2011, Claimant Nadeau asserted causes of action for churning; misrepresentations; and omission of facts. Claimant alleged that Respondents never explained the basis for charging commissions in his account and that Emmet Larkin not only covered up the amount of commissions, but also the methodology for their calculation. Claiming that Respondents churned his account to the extent that he paid to them $178,000 in commissions (as against an alleged $220,000 in equity contributions), Claimant sought $211,850 in damages. In the Matter of the FINRA Arbitration Between Steven C. Nadeau, Claimant, v. Emmett A. Larkin Company, Inc.; Sterne Agee Financial Services, Inc.; Jason M. Ganton; John A. Orlando; and Melvin Lee Peterson, Respondents (FINRA Arbitration 11-00189, March 29, 2012).

Respondents Emmett A. Larkin Company; Ganton, Orlando, and Peterson generally denied the allegations and asserted various affirmative defenses.

In November 2011, Claimant dismissed all claims against Respondent Sterne Agee.

At the arbitration hearing, the FINRA Arbitration Panel found that Claimant did not comply with and failed to produce relevant documents to Respondents and, in consideration of such conduct, struck Claimant’s rebuttal testimony as a sanction for the non-production.

DECISION

The FINRA Arbitration Panels denied and dismissed with prejudice Claimant’s claims against Respondents Ganton and Orlando.

The FINRA Arbitration Panel found  Respondents Emmett A. Larkin Company, Inc. and Peterson, jointly and severally liable and ordered them to pay to Claimant Nadeau  $69,000.00 in compensatory damages plus interest.

Bill Singer’s Comment

Although I’m not really certain as to just exactly what went on here, I was quite titillated by this statement in the Decision:

The Panel has made the following finding of fact:

“The confirmation tickets used by Respondent Emmet A. Larkin Company, Inc. were misleading, incomprehensible, and contributed to the losses suffered by Claimant”

Wow!

I mean, seriously?  I wish that this Panel had explained with some detail as to what it was about the confirms that rendered them “misleading, incomprehensible” and to further explain how such disclosures “contributed to the losses suffered by Claimant.”  I don’t say that sarcastically but with all due respect.

Many, many consumers struggle with what is presented to them by their brokerage firms — even some industry professionals are stymied at times when trying to decipher a confirm or statement.  It doesn’t help that every firm uses a different format or that too much critical information is denoted by some minuscule symbol whose explanation is found in small print on the reverse of the document.

If I were the likes of Merrill Lynch, Morgan Stanley, JP Morgan, Wells Fargo, or UBS I would be troubled by this Decision — after all, who’s to say what is or isn’t misleading or incomprehensible when it comes to so much of Wall Street’s gibberish and fine print? Armed with this provocative Arbitration Decision, how many public customers will seek damages based upon their inability to crack the industry’s Rosetta Stone of account statements?


 
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