An irreverent Wall Street Blog
by Bill Singer
 
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

Ya Win Some, Ya Lose Some: Customers Sue Brokers Over Tax Bills.
Written: November 8, 2010

On the one hand ---

Ameriprise Wins One

Pursuant to a FINRA Arbitration Statement of Claim filed in April 2010, Claimants sought $16,778.08 in compensatory damages, $2,500 in punitive damages, $5,525 in various costs in connection with the following causes of action:

* failure to disclose material facts of critical importance;
* failure to provide suitable investment advice;
* failure to prevent or correct the negligent management of accounts;
* failure to employ protective strategies to avoid negative tax ramifications;
* negligence;
* breach of duties;
* respondeat superior;
* material omissions; and
* unsuitable investment strategy.

In the Matter of the Arbitration Between Marrell R. and Wallis T. Greutman Trust and its Trustees Marrell Greutman and Terry Greutman, Claimants vs. Ameriprise Financial Services, Inc., Respondent (FINRA Arbitration  10-01661, October 29, 2010)

In light of the fairly prodigious number of causes of action and the attendant request for punitive damages, I was fully expecting a somewhat lurid set of facts.  Instead, and I quote the sole FINRA Arbitrator verbatim, this is the whimper in lieu of the bang:

ARBITRATOR'S REPORT: The Claimants elected to transfer accounts to Respondent and follow the plan to replace certain holdings. The sales (and purchases) generated reportable income reflected in 2007 1099 Forms supplied to Claimants which Claimants neglected to provide to their tax advisor. The resulting underpayment of Claimants' 2007 taxes was not Respondent's fault. 

. . .

1) Claimants' claims are denied in their entirety. 2) Claimants' request for punitive damages is denied. 3) Claimants' request for attorneys' fees is denied. 3) All other relief requests are denied. 4) FINRA Dispute Resolution shall retain the $425.00 filing fee previously deposited by Claimants. 5) Respondent is liable for and shall pay to Claimants costs in the amount of $212.50 to reimburse Claimants for one-half of the filing fee previously paid to FINRA Dispute Resolution.

On the other hand ---

H. Beck, Inc. Loses One

In a FINRA Arbitration Statement of Claim filed in April 2009, public customer Paula Eisenstein alleged that she had sustained damages as a result of tax liabilities that she incurred following an account liquidation and the unsuitable mutual funds in Claimant's account, including but not limited to the Putnam High Yield Advantage Fund.Claimant asserted various causes of action including breach of contract and fraud, and sought  $800,000 in compensatory damages plus interest, fees, and costs; and a further $800,000 in punitive damages. Respondents generally denied the allegations, asserted various affirmative defenses, and request expungement of the matter from the Central Registration Depository (CRD) records. In the Matter of the Arbitration Between Paula Eisenstein, Claimant, versus Eric G. Meyers and H. Beck, Inc., Respondents (FINRA Arbitration 09-02175, November 2, 2010).

The FINRA Panel determined that Claimant signed a Proposal to Provide Investment Services ("PPIS") with Respondent H. Beck, Inc. on the recommendation of Respondent Meyers. The execution of the PPIS occurred after discussions between Claimant and Respondent Meyers, who was a registered investment advisor and President of H. Beck, Inc. in June 2006. 

The FINRA Panel heard conflicting testimony regarding the circumstances surrounding the execution of the PPIS as to whether:

  1. Claimant's portfolio of stocks to be transferred to Respondent H. Beck, Inc. was to be liquidated immediately upon transfer without further discussion between the parties; and,
  2. the tax implications of the portfolio liquidation were adequately and explicitly explained to Claimant.

As a result of the liquidation of the portfolio, Claimant incurred a substantial one-time state and federal tax liability, including alternative minimum taxes (AMT).

The FINRA Arbitration Panel concluded that the decision to liquidate Claimant's portfolio, even if Claimant did not specifically understand the tax implications, was a necessary requirement for the fulfillment of the investment objectives detailed in the PPIS, which Claimant had approved. However, the Panel concluded that in the process of executing the PPIS, there was a failure to fully communicate and understand the tax implications of investing in the models proposed by Respondents H. Beck, Inc. and Meyers.

In making its decision, the FINRA Panel allowed for the fact that at no time did Respondents Meyers or H. Beck, Inc. hold themselves out to Claimant as tax planners or tax advisors. Also, the Panel distinguished between the actions and statements of Respondent Meyers and those of the member firm Respondent H. Beck, Inc., and, accordingly, the Panel found that the procedures and practices in place for supervising employees of Respondent H. Beck, Inc., particularly the President, were inadequate. The Panel strongly recommended that procedures and practices be put in place by Respondent H. Beck, Inc. for adequately supervising all of its employees.

  • The FINRA Arbitration Panel found Respondent H. Beck, Inc. liable, declined to recommend the expungement from the firm's CRD record of the matter,  and ordered the firm to pay to Claimant:
    • compensatory damages in the amount of $209,282.75;
    • interest at the legal statutory rate in the state of Maryland from April 12, 2007, until the date the award is served; and
    • attorneys' fees in the amount of $60,000.00 pursuant to Maryland Code Ann., Corps. & Assn's Section 11-703(b)(1).
  • The FINRA Arbitration Panel denied Claimant's claims as against Respondent Meyers, and recommended the expungement of all references to the above captioned arbitration from Meyers' CRD records.

Oh, and one last thing -- do with this bit of information what you will: Claimant is also a cousin of Respondent Meyers.

Also, see this recent article: FINRA Arbitration Panel Rejects Duty to Advise on Tax Consequences by Broker (October 6, 2010) at http://www.brokeandbroker.com/index.php?a=blog&id=578


Joseph D. Bonanno used the identity of a dead baby to become a registered stock broker and fiduciary investment advisor and got away with it for eight years. And yet again, the regulators failed to notice.

READ BILL SINGER'S "STREET SWEEPER" COLUMN ON FORBES.COM AT:

http://www.forbes.com/2010/11/04/financial-advisor-network-regulatory-broker-identity-theft.html

 
 

http://www.huffingtonpost.com/bill-singer/danger-legal-sharks-circl_b_773661.html


 
[^top^]

Previous Entries
April 25, 2015
FINRA Named As Defendant In Case Alleging Altered Electronic FilesToday's BrokeAndBroker.com Blog discusses a civil Complaint invo... Read On
April 24, 2015
Today's BrokeAndBroker.com Blog discusses a civil Complaint involving the somewhat esoteric legal issue of "spoliation," which involves the alleged ... Read On
April 22, 2015
On April 22, 2015, the Securities And Exchange Commission announced it was awarding to a compliance professional a whistleblower award of between $1.4... Read On
April 22, 2015
On April 21, 2015, Nvinder Singh Sarao, 36, Hounslow, United Kingdom was named as a Defendant in a criminal Complaint  alleging 1 count... Read On
April 22, 2015
Among the false perceptions that many have is the reliability of so-called official records. If it's something maintained by a regulator, we tend to b... Read On
April 21, 2015
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page BrokeAndBroker.com Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS: Brok... Read On
April 20, 2015
In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in March 2013, Claimant Marriott asserted breach of fiduci... Read On
BrokeAndBroker.com Job Search


Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Chepucavage Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Brokeandbroker.com Morgan Keegan Arbitration Counterclaim BrokeAndBroker.com Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC RRBDLAW.com Ponzi Affinity Fraud Wachovia Criminal Raymond James BrokeandBroker.com Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX BrokerAndBroker.com FBI Banc of America Pro Se PCAOB Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax RRBDlaw.com Email Netschi Moore Whistleblower Street Sweeper Countrywide Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Thain Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw 8210 Appeal Fowler LPL Johnson Cellphone US Airways JPM Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Rule 3050 Away Account Credit Repair PN Advisor Placement Group Fifth Amendment Forex Mortgage Private Placement Moon CGMI Failure to Supervise Merrill Anderson Exam Lee Borrowing Tax Lien Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker Deferred Compensation RIA Prison Disclosure NASAA Aguilar FCPA Subway Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital Due Process God HSBC Private Placements Eric Stein Wire Fraud FINOP CCO Compliance Audit Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Series 7 Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA Disability MetLife Continuing Education Cheating OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Investor Alert Evidence Judgment Bank Fraud Deceased Bill Singer BrokeAndBroker TSSB OHO Leveraged ETF Mary Jo White Trustee Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Commissioner Stein Rule 3040 Class Action Beneficiary NYAG Schneiderman 11th Circuit Insurance Gallagher White Self Regulation Short Sale Compromise Website Rule 2010 Check TRO Supervision Vacatur Remand SDNY Rule 12206 BrokeAndBroker Bill Singer Piwowar Stifel Rule 1122 Article V signature Confidential Inside Information Reg SP VA Regulation SP Fees Cease And Desist Customer Rule 3270 Rule 3240 Annual Compliance Questionnaire OWB 2Cir Red Flags Payroll Stockbrokers Cybercrime Loans BrokerCheck Altered Records
 
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+