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Recent Cases: NYSE award for concentration of all of clients' account in one speculative stock. |
Mr. and Mrs. Allen were both in their mid 40s. Mr. Allen owned a small construction business and his wife stayed at home and raised their children. The Allens met their broker, Mr. Adams, when he purchased their home. The broker often touted his services as a stockbroker and ultimately talked the Claimants into opening a trust account and a joint account with Respondents. In less than six months, all of the Claimants' savings was invested in one highly speculative stock. In addition to making unauthorized trades in the Claimants' accounts, Respondents purchased numerous shares of the speculative stock on margin, further exposing the Claimants to risk. When the Claimants asked their broker about the trades in their accounts, he always had an excuse for why the trades had been done. His excuses included: "it was a computer error;" "those shares really belong in someone else's account;" or "can't you see I'm trying to make you money." When the Claimants realized they had lost most of their life savings and could not get any help from the branch manager, the Claimants transferred what was left of their accounts to another firm. A hearing panel appointed by the NYSE entered an award on behalf of the Claimants for all of their out of pocket losses, $41,000 in punitive damages, and $650 in costs. Josephthal Lyon and Ross was assessed all of the forum fees. In addition, the panel made a disciplinary referral to the NYSE Division of Enforcement based upon the sales practices of the broker, the failure of the brokerage firm and its branch manager to supervise the broker, and the failure of the brokerage firm to comply with the discovery rules of the NYSE. The brokerage firm was fined $10,000 for failure to comply with NYSE Rule 619. The Allens' case was handled by Ed Dovin and Sandra Malkin. |
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