FINRA Arbitration Panel Divines Intent of Deceased In Dividing Account Assets

March 29, 2018

In today's Blog we are confronted with yet another variation on the theme of how folks attempt to provide for their loved ones after death but how life, regulation, compliance, and law may frustrate such intentions. Given the often incomprehensible state of estate law and some profound misunderstanding about how the mechanics of joint, tenants in common, and transfer-on-death brokerage accounts work, public customers often think that their after-death desires are going to be accomplished through resort to a 'of estate-planning and trust documents and maneuvers. Sometimes it all works out. Sometimes it's a mess. One of the rewarding things about the BrokeAndBroker Blog's coverage of near-disasters and disasters is that we call attention to issues that folks haven't given enough thought to and frequently get thanked for the warning. 

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in February 2017, and as amended thereafter, Claimant Liao , appearing pro se, asserted breach of fiduciary duty by mishandling of account; intentional destruction of critical material evidence causing substantial financial loss, hardship, emotional and mental distress, negligence, and fraud. Claimant sought restoration of her sole and full rights to the account valued at $178,953.42; $300,000.00 in punitive damages; treble damages; and interest. In the Matter of the FINRA Arbitration Between: Claimant Hui Z. Liao, Claimant, v. Fidelity Brokerage Services LLC, National Financial Services LLC, and Andrew Flessel, Respondents, -- AND - Matthew Fraser, Melanie Hart, and Jennifer Fraser, Third-Party Respondent (FINRA Arbitration Case 17-00422 / March 22, 2018).

Respondents' Requests

Respondents generally denied the allegations, asserted various affirmative defenses, and filed a Third-Party Claim adding Third-Party Respondents as necessary parties. Respondents took no position with regard to Claimant Liao's request that she be declared the sole beneficiary of the account. Respondents requested, in part,  that the FINRA Arbitration Panel determine whether the accounts should remain restricted pending the arbitration's outcome and issue an Order as to how to disburse funds in the account. 

Third-Party Respondents

In the Answer to the Third Party Claim, Third-Party Respondents Melanie Hart and Matthew Fraser requested that the beneficiary designations for the account on file with Respondent Fidelity should be enforced according to its terms unless it is proven by Claimant that the documentation is erroneous. 

Third-Party Respondent Jennifer Fraser is not a member or associated person of FINRA, did not voluntarily submit to arbitration, and, accordingly, the FINRA Arbitration Panel made no determination with respect to Respondents' Third-Party Claims against her . 


The FINRA Arbitration panel denied Claimant Liao's claims. In rendering its decision, the Panel offered this explanation:

The evidence does not indicate fraud by any Respondent, nor does it appear that any error by the Respondents affected the deceased's designation of beneficiaries for the account at issue in this manner. 

The Panel therefore (1) concludes as a factual matter that Mr. Fraser intended that upon his death the assets in the "1787 Account" be allocated in even shares (25% each) to his widow, Hui Z. Liao, and his three children, Melanie Hart, Matthew Fraser, and Jennifer Fraser, and (2) directs that Fidelity distribute the funds to the Claimant and the Third-Party Respondents over which it has jurisdiction, being Third Party Respondents Hart and M. Fraser. 

The Panel also notes that Claimant made a number of allegations against current and prior counsel representing Respondents, Third Party Respondents and Mr. Fraser's Estate. On the evidence before the Panel, these allegations appear to be wholly baseless and inappropriate. 

Bill Singer's Comment

Frankly, I would have liked a bit more detail about the 1787 Account and the dynamics of the relationship among the deceased, his widow, and the three children. I would have also appreciated some explanation as to whether that account was set up as a joint account or a transfer-on-death or whatever. That being said, I'm inferring that the various parties were enmeshed in a somewhat heated and nasty dispute and that, as is typical with these estate matters, there was some sense of outrage that had arisen among the widow and three children involved. Given that Panel's admonition that Claimant Liao's allegations about various lawyers "appear to be wholly baseless and inappropriate," perhaps the arbitrators decided that discretion was the better part of valor and simply opted to ties things up quickly and without dredging up some sensitive details. To that extent, I would forgive the lack of content and context.

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