Today's BrokeAndBroker.com Blog considers the complaints of two public customers who were angered about losses sustained in their Individual Retirement Accounts as a result of allegedly being overly-concentrated in an African mining stock. Right off the bat, this is going to be a tough one for any stockbroker and/or brokerage firm to defend. Just juxtapose a few concepts: IRA, African mining stock, and over-concentration. Not that those three planets should never come into the same orbit but, you know, even at first blush you got more questions than answers.Case In Point In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in January 2015, public customers Claimants Elaine Hornyak and Steven Hornyak alleged breach of fiduciary duty, misrepresentations and omissions, negligence, and violations of Indiana Securities Laws in connection with "substantial losses" that they allegedly sustained as a result of a purportedly unsuitable recommendation by registered representative Respondent Daly. Claimants alleged that Respondent Daly over-concentrated their retirement assets into an African mining company, which they further characterized as a high-risk investment. Initially, Claimants sought $27,912 in compensatory damages plus punitive damages, interest, attorneys's fees, and costs. Subsequently, Claimants reduced their demands to $11,899 in compensatory damages, $5,066 in interest, and $5,090 in attorneys's fees. In the Matter of the FINRA Arbitration Between Elaine Hornyak IRA and Steven Hornyak IRA, Claimants, vs. Ameriprise Financial Services, Inc. and Radcliffe Robert Daly, Respondents (FINRA Arbitration 15-00273, March 10, 2016).Respondent Daly generally denied the allegations in the Statement of Claim. One Down In March 2015, Claimants notified FINRA that they had dismissed all claims asserted against Respondent Ameriprise Financial Services, Inc.; and, accordingly, the sole FINRA Arbitrator did not adjudicate any claims asserted against the firm. Award The sole FINRA Arbitrator found Respondent Daly liable to and ordered him to pay to the Claimants $11,899.00 in compensatory damages with 8% interest from August 29, 2013 through December 7, 2015. Upon payment of the Award, Claimants were ordered to tender their shares in the African mining company. Additionally, Daly was ordered to pay $75 to Claimants as reimbursement for half of the paid FINRA filing fees. Bill Singer's Comment One of the goals of the BrokeAndBroker.com Blog is to enhance the limited content and context in many Wall Street regulatory and arbitration documents. When we talk about "content," we mean the facts and circumstances that explain what happened and what was considered. When we talk about "context," we mean those factors that best explain why things happened and how we should best attempt to understand the rulings, decisions, and awards. In that spirit, let's look at some additional factors, which I will allow to speak for themselves:According to online FINRA BrokerCheck records as of March 31, 2016, Ameriprise disclosed that Daly was "Permitted to Resign" on January 28, 2014, based upon allegations that:
REGISTERED REPRESENTATIVE WAS TERMINATED FOR SOLICITATION OF EQUITY SECURITIES THAT WERE NOT SUPPORTED BY THE FIRM'S APPROVED RESEARCH PROVIDERS AND FOR MISMARKING OF TRADE TICKETS.Additional BrokerCheck records disclose that on March 16, 2015, Ameriprise settled with the Hornyaks; and, according to the "Firm Statement":
AMERIPRISE CHOSE TO SETTLE THIS MATTER FOR $21,350 IN ORDER TO AVOID THE COSTS OF FINRA ARBITRATION. THE FINRA ARBITRATION CASE CONTINUES AGAINST THE FORMER ADVISOR.Under the "Customer Dispute - Settled" portion of Daly's BrokerCheck record, there are five settlements involving investments in "SLOU" (Leone Asset Management), the African mining stock at issue in Hornyak. The reported amounts of the five settlements are $129,025.57; $32,360.20; $15,681.50; $111,111.60; and $25,479.16. Separate and apart from the arbitrations, Daly was a respondent in a 2014 FINRA regulatory settlement. For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Radcliffe Daly submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Radcliffe Daly, Respondent (AWC 2014039820601, November 5, 2014). The AWC asserts in the "Overview" section that;
DURING THE PERIOD MAY 2013 - NOVEMBER 2013, WHILE REGISTERED WITH AMERIPRISE FINANCIAL SERVICES, INC., RESPONDENT RADCLIFFE DALY MISMARKED MORE THAN 250 ORDER TICKETS FOR SOLICITED TRANSACTIONS AS UNSOLICITED. IN ADDITION, DURING THE SAME PERIOD, HE ENGAGED IN PRIVATE SECURITIES TRANSACTIONS WITHOUT PROVIDING WRITTEN NOTICE TO THE FIRM WITH WHICH HE WAS ASSOCIATED AND EXERCISED DISCRETION IN CUSTOMER ACCOUNTS WITHOUT WRITTEN AUTHORIZATION.In accordance with the terms of the AWC, FINRA imposed upon Respondent Daly a $15,000 fine and a 9-month suspension from association with a FINRA member firm.