Wins & Settlements
Lax & Neville LLP Appointed Special Securities Counsel for Court Appointed Receiver
On September 18, 2017, Lax & Neville LLP was appointed special securities litigation counsel for court-appointed Receiver, Richard W. Barry, in an action commenced by the Attorney General of New Jersey on behalf of the Chief of the New Jersey Bureau of Securities. The action alleged securities fraud in the sale of securities, as well as other violations of the New Jersey Uniform Securities Laws, by defendants Osiris Fund Limited Partnership (a hedge fund), Peter Zuck, and others. State of New Jersey, et al. v. Peter Zuck, et al., Docket No.: HDU-C-125-12.
The Receiver—who was empowered to pursue actions on behalf of the receivership estate to recover assets for the benefit of defrauded investors, victims, and creditors—filed a motion to approve the retention of Lax & Neville LLP as special securities counsel to assist the Receiver in his duties and seek relief on behalf of those defrauded. Given the sophisticated nature of the securities-related issues, the Receiver sought to retain a law firm with specialized skill, knowledge and experience in securities law and arbitration. Lax & Neville LLP’s retention as special securities counsel was approved by court order on September 18, 2017.
On December 30, 2017, Lax & Neville LLP commenced a Financial Industry Regulatory Authority (“FINRA”) arbitration claim on the Receiver’s behalf against Interactive Brokers and Kevin Michael Fischer, who is the head of Interactive Brokers LLC’s block trading desk. The FINRA arbitration concerned the collapse of Osiris Fund, a fraudulent Ponzi scheme orchestrated by Peter Zuck, a convicted felon who was banned from the securities industry (specifically, the National Futures Association (“NFA”)) fifteen years before he opened accounts with Fischer at Interactive Brokers. The Receiver’s Statement of Claim alleged that, from April 2009 through December 2011, Interactive Brokers ignored numerous red flags, including obviously fraudulent account opening documents, suspicious fund transfers, ludicrously high “management fees,” and hundreds of e-mails and hours of recorded phone calls between Osiris Fund’s employees and Fischer. The Receiver further alleged that Interactive Brokers and Fisher became instrumental to the scheme, with Interactive Brokers providing substantial participation in the form of what was apparently a completely unsupervised platform that gave Osiris Fund credibility with Investors, and with Fischer participating substantially in marketing and solicitating new investors, recommending securities, directing Osiris Fund’s employees, and at times managing Osiris Fund’s investments himself. The Receiver alleged that Interactive Brokers, Fisher, and Osiris Fund defrauded approximately 72 investors out of approximately $6.5 million.
On March 22, 2018, Interactive Brokers and Fisher moved by Order to Show Cause seeking injunctive relief restraining the Receiver from pursuing claims brought against them in the pending FINRA arbitration proceeding. Interactive Brokers and Fisher also sought declaratory relief that the Receiver’s filing a Statement of Claim in the FINRA arbitration overstepped the scope of authority granted to him by the Court in its Order appointing him as Receiver. In opposition to Interactive Brokers and Fisher’s Application for the Entry of an Order to Show Cause, Lax & Neville LLP filed a Cross-Motion on the Receiver’s behalf on April 24, 2018 seeking to compel arbitration and dismiss the case with prejudice. By Order, dated May 16, 2018, the Superior Court, Chancery Division denied the relief sought by Interactive Brokers and Fisher and granted the Receiver’s Cross-Motion, compelling the parties to continue with the pending FINRA arbitration and dismissing this case with prejudice.
On July 6, 2018, Interactive Brokers and Fisher appealed the Superior Court, Chancery Division’s decision before the Superior Court, Appellate Division. On December 31, 2018, the Appellate Division affirmed the Chancery Division’s May 16, 2018 Order dismissing the case and compelling the continuation of arbitration.
Interactive Brokers, Fisher, and the Receiver ultimately entered into an agreement resolving all of the Receiver’s claims against Interactive in the FINRA arbitration.
The New Jersey Bureau of Securities and Interactive Brokers also entered into a Consent Order in connection with any accounts held by the Osiris Fund and Peter Zuck. Pursuant to the Consent Order, the New Jersey Bureau of Securities found that “Interactive Brokers’ failure to conduct the NFA BASIC search during the account opening process for Zuck and Osiris-related accounts constitutes failure to reasonably supervise pursuant to N.J.S.A. 49:3-58(a)(2)(xi).” Consent Order. Interactive Brokers was also assessed a civil monetary penalty in the amount of $100,000.
Lax & Neville LLP has extensive experience in securities arbitration and investment fraud litigation, and as special securities counsel to receivers and trustees.
New York Supreme Court, Commercial Division Denies Credit Suisse's Petition to Vacate $1 Million FINRA Award for Unpaid Deferred Compensation
On November 6, 2018, Nicolas Finn, a former Credit Suisse investment adviser represented by Lax & Neville LLP, won a FINRA arbitration award against Credit Suisse Securities (USA) LLC for unpaid deferred compensation. On November 27, 2018, Credit Suisse petitioned the New York Supreme Court (Commercial Division) to vacate the Finn Award on grounds of arbitrator misconduct and manifest disregard of the law. See Credit Suisse Securities (USA) LLC v. Nicholas B. Finn, CV 655870/2018. The Honorable Judge Jennifer Schecter, by order dated April 24, 2018, denied the Petition to Vacate in its entirety and entered judgment for Mr. Finn.
Credit Suisse is currently being sued by dozens of its former investment advisers in connection with the 2015 closure of its US private bank. Four FINRA Panels have issued awards thus far, all of them finding Credit Suisse terminated its advisers without cause and ordering it to pay deferred compensation. This is the first time a court has heard Credit Suisse's defenses to the Credit Suisse Deferred Compensation Arbitrations.
Credit Suisse contended that the Finn Panel acted in manifest disregard of the law on two issues. First, Credit Suisse argued that Mr. Finn resigned as a matter of law when he left Credit Suisse on November 23, 2015, a month after Credit Suisse announced it was closing its private bank. Under the terms of Credit Suisse's contracts with its investment advisers, deferred compensation is cancelled immediately upon voluntary resignation but vests immediately upon termination without cause. The evidence at arbitration overwhelmingly established that Credit Suisse both structured the closure of the private bank and deliberately concealed and misrepresented material information in order to mischaracterize its advisers as having "resigned" after they were given no option but to leave Credit Suisse. It then cancelled more than 95% of its advisers' deferred compensation, amounting to almost $200 million. The Finn Panel rejected Credit Suisse's argument that Mr. Finn resigned voluntarily and ordered expungement of "Voluntary" termination from his Form U-5. The Panel recommended that the Form U-5 be amended to state that the reason for termination was "Termination Without Cause."
Having reviewed the record, including ten days of testimony and more than a hundred internal Credit Suisse documents, the Court observed that Mr. Finn had no option but to leave Credit Suisse and that the Panel was not in manifest disregard of the law when it found he was terminated involuntarily.
Second, Credit Suisse argued that even if Mr. Finn was terminated without cause, immediately vesting 100% of his deferred compensation, he was "made whole" when he accepted employment with UBS. As part of his hiring package, Mr. Finn was to receive forgivable promissory notes over the course of nine years provided he remained an employee in good standing at UBS and met a production target. In effect, Credit Suisse contended that, as a "matter of black letter law," Mr. Finn must work 9 years for UBS in order to pay off Credit Suisse's debt to Mr. Finn.
The Court disagreed, finding that even in the event Mr. Finn remains at UBS for 9 years and receives 100% of his UBS compensation "[h]e will have earned it from UBS and he will have earned it from Credit Suisse." It held that the Panel did not act in manifest disregard of the law when it found there was no "mitigation" of a vested right to compensation by Credit Suisse.
Credit Suisse owes more than $100 million in deferred compensation to investment advisers who joined firms other than Wells Fargo after Credit Suisse terminated them without cause. To discuss this matter, please contact Barry R. Lax, Brian J. Neville, Sandra P. Lahens or Robert R. Miller at (212) 696-1999.
Two More Former Credit Suisse Advisers Represented by Lax & Neville LLP Win FINRA Award, New York Labor Law Claims Against Credit Suisse
On May 7, 2019, two former Credit Suisse investment advisers represented by Lax & Neville LLP won a $6.68 million FINRA arbitration award against Credit Suisse Securities (USA) LLC for unpaid deferred compensation and violations of the New York Labor Law ("NYLL"). This is the fourth FINRA Award against Credit Suisse for unpaid deferred compensation.
The claimants, Joseph Todd Lerner and Anna Sarai Winderbaum, were advisers in the New York branch of Credit Suisse's US private banking division ("PBUSA") and were terminated when Credit Suisse closed PBUSA. Credit Suisse took the position, as it has with hundreds of its former investment advisers, that Ms. Winderbaum and Mr. Lerner voluntarily resigned and forfeited their deferred compensation. A three member FINRA Arbitration Panel determined that Credit Suisse terminated Ms. Winderbaum and Mr. Lerner without cause, breached their employment agreements by cancelling their deferred compensation and violated the NYLL. The FINRA Panel was chaired by a law professor and expert in labor and employment law.
The FINRA Panel awarded Ms. Winderbaum and Mr. Lerner compensatory damages totaling $2,787,344, which included 100% of their deferred compensation awards, 2015 deferred compensation, and severance. Having concluded that the cancellation of deferred compensation violated the NYLL, the FINRA Panel awarded statutorily mandated interest, attorneys' fees and liquidated damages equal to 100% of the unpaid compensation. See NYLL § 198(1-a). The FINRA Panel ordered Credit Suisse to pay 100% of the FINRA forum fees, totaling $50,250.00, and recommended expungement of Mr. Lerner and Ms. Winderbaum's Form U-5, the termination notice a broker-dealer is required to file with FINRA. As with hundreds of their colleagues, Credit Suisse falsely reported that Mr. Lerner and Ms. Winderbaum's "Reason for Termination" was "Voluntary," i.e. that they voluntarily resigned. The FINRA Panel recommended that the "Reason for Termination" be changed to "terminated without cause." The FINRA Panel also denied Credit Suisse's counterclaims. To view this Award, visit Joseph Todd Lerner and Anna Sarai Winderbaum v. Credit Suisse Securities (USA) LLC, FINRA No. 17-00057.
To discuss this FINRA arbitration Award, please contact Barry R. Lax, Brian J. Neville, Sandra P. Lahens or Robert R. Miller at (212) 696-1999.
Lax & Neville LLP Wins over $1.2 Million and Expungement of Broker Record in Wrongful Termination Suit
On November 21, 2018, Lax & Neville LLP won a FINRA arbitration award on behalf of a financial advisor (the “Claimant”) against First Republic Securities. A three-person Arbitration Panel rendered the arbitration award valued at $1,202,643.85.
The Panel further ruled that the Claimant's U5 language regarding termination be changed to “[Claimant’s] termination was unwarranted.”
The Claimant asserted violation of New York Labor Law; breach of contract; breach of the implied covenant of good faith and fair dealing; abuse of the Form U5, slander and libel; and tortuous interference with business relationships
First Republic requested that the Panel deny Claimant’s claims for expungement and monetary damages in their entirety and dismiss Claimant’s Statement of Claim with prejudice. In the Counterclaim, First Republic requested that the Panel award First Republic the sum of $142,788.46, plus interest at the statutory rate of 9% per year; all costs it incurred to enforce Claimant’s obligations under the Promissory Note, including an award of reasonable attorneys’ fees; and such other and further relief as the Panel deems just and proper.
The Panel granted the Claimant $727,000.00 in lost future wages, $49,194.00 in compensatory damages for monies frozen and held at First Republic, $26,943.89 in costs, and $256,717.50 in attorney’s fees. The Panel additionally rejected First Republic’s counterclaims for Claimant's promissory note, ruling that First Republic must forgive the $142,788.46 promissory note.
To discuss this FINRA Arbitration Award, please contact Brian J. Neville, Barry R. Lax or Sandra P. Lahens at (212) 696-1999.
Another Former Credit Suisse Adviser Represented by Lax & Neville LLP Wins a FINRA Arbitration Award Against Credit Suisse Securities (USA) LLC in the Deferred Compensation Arbitrations
On November 6, 2018, a former Credit Suisse investment adviser represented by Lax & Neville LLP, a leading securities and employment law firm, won a FINRA arbitration award against Credit Suisse Securities (USA) LLC for unpaid deferred compensation. This is the second FINRA Award against Credit Suisse for unpaid deferred compensation.
The claimant, Nicholas Finn, was an adviser in Credit Suisse’s New York US private banking division (“PBUSA”) and was terminated when Credit Suisse closed PBUSA. Credit Suisse took the position, as it has with hundreds of other former investment advisers, that Mr. Finn voluntarily resigned and forfeited his deferred compensation. A three arbitrator panel determined that Credit Suisse terminated Mr. Finn without cause and awarded him all of his compensatory damages in the amount of $975,530, which included all of his deferred compensation awards valued as of November 23, 2015, the day he left Credit Suisse, and his 2015 deferred compensation. The Panel ordered Credit Suisse to pay 100% of the FINRA forum fees, totaling $27,300, and recommended expungement of Mr. Finn’s Form U-5, the termination notice a broker-dealer is required to file with FINRA. As with Mr. Finn’s colleagues, Credit Suisse falsely reported that Mr. Finn’s “Reason for Termination” was “Voluntary,” i.e. that Mr. Finn resigned. The Panel recommended that the “Reason for Termination” be changed to “terminated without cause.” The Panel also denied Credit Suisse’s counterclaims. To view this Award, Nicholas Finn v. Credit Suisse Securities (USA) LLC, FINRA Case No. 17-01277.
Credit Suisse raised a mitigation defense based upon compensation Mr. Finn received or may receive from his current employer, UBS Financial Services Inc. Like the Panel in Brian Chilton v. Credit Suisse Securities (USA) LLC, FINRA Case No. 16-03065, the Finn Panel rejected Credit Suisse’s mitigation defense when it awarded Mr. Finn all of his Credit Suisse deferred compensation.
To discuss this FINRA arbitration Award, please contact Barry R. Lax, Brian J. Neville, Sandra P. Lahens or Robert R. Miller at (212) 696-1999.
Former Credit Suisse Adviser Represented By Lax & Neville LLP Wins First FINRA Arbitration Award Against Credit Suisse Securities (USA) LLC in the Deferred Compensation Arbitrations
On October 10, 2018, a former Credit Suisse investment adviser represented by Lax & Neville LLP, a leading securities and employment law firm, won a FINRA arbitration award against Credit Suisse Securities (USA) LLC for unpaid deferred compensation. The claimant, Brian Chilton, was an adviser in Credit Suisse’s US private banking division (“PBUSA”) and was terminated when Credit Suisse closed PBUSA. As it did with hundreds of his colleagues, Credit Suisse took the position that Mr. Chilton voluntarily resigned and forfeited his deferred compensation. A highly sophisticated and experienced three arbitrator panel determined that Credit Suisse terminated Mr. Chilton without cause and awarded him all of his deferred compensation, consisting of 39,980 shares of Credit Suisse AG valued as of the date of his termination at $585,307.20. The Panel ordered Credit Suisse to pay interest of $131,694.12, attorneys’ fees of $146,326.80, and 100% of the FINRA forum fees, totaling $69,750.00. The Panel also recommended expungement of Mr. Chilton’s Form U-5, the termination notice a broker-dealer is required to file with FINRA. Credit Suisse had falsely reported that Mr. Chilton’s “Reason for Termination” was “Voluntary,” i.e. that Mr. Chilton resigned. The Panel recommended that the “Reason for Termination” be changed to “terminated without cause.” To view this Award, Brian Chilton v. Credit Suisse Securities (USA) LLC, FINRA Case No. 16-03065.
Credit Suisse announced it was closing PBUSA on October 20, 2015. Dozens of its former advisers have subsequently filed FINRA Arbitration claims for their unpaid deferred compensation. The claims are based upon unambiguous language in Credit Suisse’s contracts providing that deferred compensation awards vest immediately upon termination without cause. In a transparent attempt to evade its deferred compensation liabilities, which amounted to hundreds of millions of dollars, Credit Suisse deliberately mischaracterized its advisers’ terminations as voluntary resignations, notwithstanding that it had announced it was closing PBUSA, told its employees, including the advisers, to find someplace else to work and told its clients to close their accounts. In its Form U-5 filings, Credit Suisse misrepresented to its regulator that the advisers had voluntarily resigned.
The Chilton Panel was the first to reach a decision on this issue and found that Mr. Chilton’s Form U-5 filing was false and should be changed to termination without cause. Under the unambiguous terms of Credit Suisse’s contracts, Mr. Chilton was therefore entitled to his deferred compensation.
To discuss this arbitration award, please contact Barry R. Lax, Sandra P. Lahens or Robert R. Miller at (212) 696-1999.
Lax & Neville Reaches $1.035 Million Settlement on Behalf of Investment-Banking Firm Owed Fees from Pay-Day Lender
On October 26, 2017, Lax & Neville reached a settlement for $1.035 million with a Pay-Day lender who owed an Investment Bank fees on funds raised, and lines of credit secured.
Lax & Neville has extensive experience representing investment bankers and financial services professionals in compensation disputes. If you are employed in the securities industry, and have a compensation dispute, or contractual dispute over monies owed, please contact Barry R. Lax or Sandra P. Lahens, Esq., at (212)-696-1999.
Lax & Neville Reaches $1.4 Million Settlement on Behalf of Clients Who Suffered Sales Practice Abuse
On August 15, 2017, Lax & Neville reached a settlement for $1.4 million with a broker-dealer responsible for overseeing a Financial Advisor who egregiously mismanaged, churned, and unjustly enriched himself at the expense of clients. The Financial Advisor placed Claimants in unsuitable, highly risky, sovereign debt instruments. The settlement amount Lax & Neville negotiated covered all the out-of-pocket losses the clients incurred including commissions, and was negotiated on behalf of a complicated trust structure with multiple parties and entities.
Lax & Neville has extensive experience representing individual investors, trusts, and estates against investment banks and broker-dealers who employ bad acting financial advisors that engage in sales practice abuse, fraud, negligence, and unjust enrichment. If you are a victim of securities fraud, please contact Barry R. Lax or Sandra P. Lahens, Esq., at (212)-696-1999.
On August 5, 2014, following an arbitration hearing before the Financial Industry Regulatory Authority (“FINRA”), Lax & Neville won an award of $919,732 on behalf of Dr. Eubulus J. Kerr against John Thomas Financial, Anastasios Belesis, George Belesis, and Joseph Castellano. The award from FINRA, which included $605,000 in compensatory damages “for churning and failure to supervise,” also included $300,000 in punitive damages against John Thomas Financial, Anastasios Belesis, and George Belesis, with interest to run. When payment of the award was not made in accordance with the FINRA Rule 12904, Lax & Neville moved to confirm the award in October 2014.
Anastasios Belesis, George Belesis, and Joseph Castellano moved to vacate the award in March 2015. The United States District Court for the Southern District of New York granted Dr. Kerr’s motion to confirm the FINRA arbitration award and denied the motions to vacate filed by Anastasios Belesis, George Belesis, and Joseph Castellano on July 16, 2015, finding that the FINRA “arbitration panel’s award of punitive damages was proper under the relevant law.”
When the award still remained unpaid, Lax & Neville began pursuing post-judgment discovery of Anastasios Belesis’ assets. As Lax & Neville gathered bank records, financial statements, deposition testimony and documents regarding millions of dollars in real estate, it became clear that Mr. Belesis had transferred considerable assets to his wife and various corporations as the investigation of and disputes with John Thomas were ongoing. Lax & Neville then moved to set aside these transfers as fraudulent conveyances on October 11, 2016. Lax & Neville additionally sought a restraining order prohibiting the transfer of any of Anastasios Belesis’ other assets.
The United States District Court for the Southern District of New York granted the restraining order on October 17, 2016 and, when Anastasios Belesis and his wife failed to appear for the hearing on the fraudulent transfers, they were held in contempt of court. Not long thereafter, Dr. Kerr received the full amount of the award and interest thereupon.
Lax & Neville additionally moved for attorneys’ fees in light of the staggering amount of work that had been required to secure payment from Anastasios Belesis. On May 1, 2017, the United States District Court for the Southern District of New York entered a judgment for over $200,000 in attorneys’ fees and warned Anastasios Belesis that he would be in contempt of court if he did not promptly pay the award. In the end, despite what the court described as Anastasios Belesis’ “history of repeatedly evading payment,” Lax & Neville recovered over $1.2 million, including interest and attorneys’ fees, on behalf of Dr. Kerr.
The attorneys at Lax & Neville LLP have extensive experience in successfully prosecuting claims on behalf of individuals who have suffered losses as a result of investment and securities fraud, and for claims of compensation. If you are a victim of fraud, please contact Lax & Neville LLP today at (212) 696-1999 to schedule a consultation.
Lax & Neville Wins Over $500,000 In A Compensation Finra Dispute
On December 28, 2016, Lax & Neville LLP, a leading national securities arbitration law firm, won a FINRA arbitration award on behalf of Anthony F. Garvin, a former investment banker at Burnham Securities, Inc. The investment banker had brought claims for breach of contract, violation of the New York Labor Law, conversion, unjust enrichment, and quantum meruit against Burnham Securities, Inc. and David S. Gilio, a former investment banker at Burnham in connection with an investment banking fee. Garvin and Gilio, with Burnham's approval, agreed to collaborate on investment banking deals, and to share the commission for all deals that originated from their joint efforts, depending upon who sourced the respective deal. When one deal closed, Garvin was not paid the full investment banking fee due to him.
A FINRA arbitration panel found Burnham and Gilio jointly and severally liable and ordered them to pay Garvin more than half a million dollars, including the full amount of compensatory damages he requested in the amount of $348,125 plus interest at the rate of 9% per annum from December 15, 2016 until the award is paid in full, pre-award interest in the amount of $121,352, costs totaling $5,721, and attorneys' fees in the amount of $90,000. "The Panel awarded attorneys' fees as all parties requested attorneys' fees." See Award.
Lax & Neville LLP has extensive experience representing investment bankers and financial services professionals in compensation disputes. To discuss this arbitration award, please contact Barry R. Lax or Sandra P. Lahens, Esq., at (212) 696-1999.
On September 8, 2015, Lax & Neville LLP, a leading national securities arbitration law firm, won a FINRA arbitration award on behalf of a trader, Gontran de Quillacq, against HSBC Securities (USA) Inc. (“HSBC”) for, among other things, the payment of compensation, including severance, expungement of his Form U-5, interest, attorneys’ fees and costs. An experienced three (3) person Arbitration Panel rendered a six figure arbitration award in compensatory damages, including interest at the rate of 9% per annum from October 2, 2012, the date of Mr. de Quillacq’s termination, until the award is paid in full. The Arbitration Panel also ordered HSBC to pay Mr. de Quillacq’s attorneys’ fees in the amount of $20,000, his costs in the amount of $3,510, and assessed all FINRA hearing fees to HSBC, in the amount of $9,000. The Arbitration Panel also found that HSBC’s reason for terminating Mr. de Quillacq’s employment was unfounded and false, and recommended the expungement of the Termination Explanation from Section 3 of Mr. de Quillacq’s (CRD # 5116610) Form U-5 filed by HSBC on November 1, 2012 and maintained by the Central Registration Depository (“CRD”). Specifically, the Arbitration Panel in the FINRA Award stated that, “The Termination Explanation shall be replaced with the following: ‘Gontran [d]e Quillacq was unjustly terminated based on his supervisor’s failure to supervise, inadequate trading system, and an error of another employee, which was not attributable to Gontran [d]e Quillacq.’” In essence, Mr. de Quillacq was vindicated from being a scapegoat and was exonerated of any alleged wrongdoing. To view this Award, Gontran de Quillacq v. HSBC Securities (USA) Inc. – FINRA # 13-02861, click here.
To discuss this arbitration award, please contact Barry R. Lax, Esq. or Sandra P. Lahens, Esq. at (212) 696-1999.
On June 26, 2015, Lax & Neville LLP, a leading national securities arbitration law firm, won a FINRA arbitration award on behalf of two retail investors (the "Retail Investors"), through Ontonimo (OMO) Limited (“Ontonimo”), against BNP Paribas Securities Corp. (“BNPP”) for the sale and marketing of an unsuitable security to the Retail Investors. A highly sophisticated and experienced three (3) person Arbitration Panel rendered the arbitration award after a ninety-five (95) day arbitration hearing (186 hearing sessions), which is the longest customer FINRA arbitration hearing in the last twenty (20) years and the second longest ever. The Arbitration Panel awarded the Retail Investors, through Ontonimo, $16.1 million in compensatory damages, inclusive of interest. This award of compensatory damages represents 100% of the net out-of-pocket loss plus interest and is one of the largest FINRA arbitration awards of compensatory damages in a customer dispute. Significantly, in addition to that relief, after winning six (6) Motions For Sanctions and five (5) Motions To Compel, the Arbitration Panel awarded $500,000 in sanctions for attorneys’ fees for BNPP’s failure to comply with the Arbitration Panel’s various discovery orders. This is the largest amount of sanctions awarded in a customer FINRA Arbitration in at least the last ten (10) years. To view this Award, Ontonimo (OMO) Limited vs. BNP Paribas Securities Corp. – FINRA Case No. 10-04744, click here.
The single investment at issue was a Resetable Strike Equity Option Transaction, which is a highly speculative and leveraged derivative call option. BNPP recommended that the Retail Investors invest approximately $14.3 million, which is more than 60% of their investable assets, into this one unsuitable security. Because BNPP had a policy that prohibited the sale of this product to retail customers, BNPP required the Retail Investors to form a corporate entity, Ontonimo, through which the Retail Investors would purchase the investment in order to circumvent BNPP’s own compliance rules. Further, BNPP required one of the Retail Investors to become a so-called “investment advisor” for Ontonimo by mandating that he execute a sham investment advisory agreement, even though he had no prior professional financial services experience and no securities licenses. In less than one and one-half years, the Resetable Strike Equity Option Transaction became worthless and the Retail Investors lost their entire $14.3 million investment. The Retail Investors paid BNPP in excess of $2.3 million in fees and costs for this investment. BNPP further retained approximately $700,000 of the value of the Resetable Strike Equity Option Transaction after its expiration.
The Arbitration Panel’s message was clear: The Retail Investors should never have been marketed and sold this unsuitable security.
To discuss this arbitration award, please contact Barry R. Lax, Esq. or Brian J. Neville, Esq. at (212) 696-1999.
Lax & Neville LLP Wins Arbitration Award Against Investment Advisory Firm SICA Wealth Management and Investment Advisor Jeffrey Sica For Breach Of Fiduciary Duty
On April 28, 2015, Lax & Neville LLP won an arbitration award on behalf of its client, an elderly widow, before the American Arbitration Association (“AAA”), against an investment advisory firm, SICA Wealth Management, and its principal, Jeffrey Sica. Lax & Neville LLP successfully argued that SICA Wealth Management and Jeffrey Sica owed their client a fiduciary duty and breached that duty by implementing an alternative investment strategy that was invested primarily in exchange-traded funds (“ETFs”), short and ultra-short ETFs, and short and ultra-short foreign currency trades.
The sole-arbitrator presiding over the AAA arbitration rendered an arbitration award which stated that SICA Wealth Management and Jeffrey Sica breached the fiduciary duty owed to their client by failing to adjust the alternative investment strategy to meet the investment objectives and risk tolerance of the client. Specifically, the award stated:
“[SICA Wealth Management and Jeffrey Sica] as registered investment advisors, each were fiduciaries to [the client]. Under the Investment Advis[e]rs Act, investment advisors must always act in their clients’ best interests and owe a fiduciary duty to their clients. An investment advisor must know the client’s suitability, objectives, time horizon and risk tolerance, limit speculative or aggressive recommendations based on information from the client and not in any way mislead a client. Starting in early 2012, [SICA Wealth Management and Jeffrey Sica] received direct communications from [the client] indicating she was anxious, scared, confused, continually experiencing sleepless nights and that she could not afford to lose any more money. Such communications required [SICA Wealth Management and Jeffrey Sachs], as fiduciaries, to act differently than they did. Merely providing assurances to be patient, that she will sleep well again, that they are confident their strategy would work, that she will be able to cover her monthly expenses over time and make her losses back, and that they have never lost money and this will not be the first time, did not fulfill their fiduciary duty to [the client].”
The arbitrator awarded compensatory damages which represented a disgorgement of fees received by SICA Wealth Management and Jeffrey Sica, and ordered that SICA Wealth Management and Jeffrey Sica pay for the majority of AAA forum fees.
The Attorneys at Lax & Neville LLP have significant experience representing investors in securities arbitrations involving complex financial products, such as ETFs. If you feel like your investment advisor is pursuing a strategy that you do not understand, contact our offices today at (212) 696-1999 and schedule a consultation.
Lax & Neville LLP Wins a FINRA Arbitration Award Granting Expungement Relief to a Former UBS Registered Representative who Sought Expungement of Nine Customer Complaints Related to Lehman Principal Protected Structured Products in FINRA Arbitration (FINRA Arbitration No. 13-01579)
On December 4, 2014, Lax & Neville LLP won expungement relief for James R. Young ("Mr. Young"), a registered representative formerly employed by UBS Financial Services, Inc. ("UBS") who sought expungement of nine (9) customer complaints on his Central Registration Depository ("CRD") record pursuant to the FINRA Code of Arbitration Procedure, Rules 2080 and 12805. CRD is the central licensing and registration system for the U.S. securities industry and its regulators, which contains information made available to the public via FINRA's BrokerCheck. Pursuant to FINRA Code Rules 2080 and 12805, an arbitration panel may grant an expungement of customer dispute information from a registered representative's CRD record. In the FINRA arbitration, Mr. Young asserted that he and his clients were all victims of UBS's "product problem" relating to its offering, developing, marketing and selling structured product investments issued by the, now bankrupt, Lehman Brothers Holdings, Inc. (herein "Lehman Principal Protected Structured Products"). Mr. Young requested the expungement of Lehman Principal Protected Structured Products arbitrations and customer complaints from his record on the basis that he was not involved in the alleged wrongdoing.
On October 7, 2014, the Panel in the FINRA arbitration conducted a recorded telephonic hearing in which Mr. Young was given the opportunity to present evidence regarding his uncontested expungement application. One of the customer Respondents appeared during that hearing and supported Mr. Young's application for expungement.
In its Arbitration Award, the Panel recommended expungement of all references to nine (9) Lehman Principal Protected Structured Products customer complaints and arbitrations from Mr. Young's registration records maintained by the CRD. Pursuant to Rule 12805 of the FINRA Code of Arbitration Procedure, the Panel based its ruling on the following Rule 2080 affirmative findings of fact:
- the registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds; and
- the claim, allegation or information is false.
In its Award, the Panel stated that it made the Rule 2080 findings of fact based on the following reasons:
The statements made by UBS, [Mr. Young's] former employer, in [Mr. Young's] U4 and U5 records are false and misleading because any sales practice violations were caused by UBS, not [Mr. Young]. Specifically, the Panel finds that the UBS Structured Products Department continued to tout Lehman Brothers structured products despite (1) mounting evidence that Lehman Brothers' creditworthiness was crumbling, and (2) increasingly pointed concern among UBS executives that the sale of Lehman Brothers products should be suspended. UBS' Structured Products Group deliberately prevented the distribution of material information about Lehman Brothers' deteriorating financial condition and continued to recommend the sale of Lehman Brothers structured products despite clear evidence of the company's rapid decline, to the detriment of both its financial advisors and customers.
UBS never should have reported any of these claims on Mr. Young's CRD. Not only was Mr. Young not named in any of the aforementioned arbitrations, but there were no allegations that he was involved in any of the alleged sales practice violations in the arbitrations or customer complaints. The Panel agreed that these disclosures should never have been reported on Mr. Young's CRD and awarded expungement, which is significant to Mr. Young's career because his CRD record contained disclosures which were false and misleading to investors.
To view this Award, click here.
Lax & Neville Wins $900,000 FINRA Arbitration, Including Punitive Damages, Against John Thomas Financial, Anastasios Belesis, George Belesis and Joseph Castellano For Churning And Failure To Supervise
On August 5, 2014, Lax & Neville LLP, a leading national securities arbitration law firm, won an approximate $900,000 FINRA Arbitration Award, which includes $300,000 in punitive damages, on behalf of a customer against former broker-dealer John Thomas Financial, its Chief Executive Officer, Anastasios P. Belesis, its President, George Belesis, and its former Compliance Officer, Joseph Castellano, for churning and failure to supervise. The case was tried during seven (7) hearing sessions in New Orleans, Louisiana. In rendering its award, the FINRA Arbitration Panel held that John Thomas Financial, Anastasios P. Belesis and George Belesis were jointly and severally liable for churning and failure to supervise and shall pay Claimant compensatory damages in the amount of $600,000, and that Joseph Castellano was liable for churning and failure to supervise and shall pay Claimant compensatory damages in the amount of $5,000, plus interest accruing at the Louisiana statutory rate from April 1, 2012 until the date of payment of the award. Furthermore, the Arbitration Award held John Thomas Financial, Anastasios P. Belesis and George Belesis jointly and severally liable to pay Claimant $300,000 in punitive damages pursuant to Alabama Code 1975 § 6-11-20. This is significant as punitive damages are rarely awarded. Moreover, John Thomas Financial, Anastasios P. Belesis and George Belesis are liable to pay Claimant $14,732.96 in costs, $375 as reimbursement of the non-refundable portion of the claim filing fee, and are responsible for three-quarters of all hearing session fees. The Arbitration Panel also denied John Thomas Financial, Anastasios P. Belesis, George Belesis and Joseph Castellano's requests for expungement with prejudice.