Wins & Settlements
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.
Lax & Neville LLP recently won a $1.7 million FINRA arbitration award against Merrill Lynch and Phil Scott for sales practice abuses concerning the Merrill Lynch Phil Scott Team and the Merrill Lynch Phil Scott Team Income and Blue Chip Portfolios. The case was tried during twenty-eight (28) hearing sessions. During the arbitration process, Claimant focused on the Merrill Lynch Phil Scott Team’s blatant disregard of industry and regulatory obligations, and Claimant’s risk tolerances and investment objectives. Claimant also focused on Merrill Lynch’s lack of supervision of Phil Scott and his team members. In finding for the Claimant, the Arbitration Panel stated in the Award that it was “particularly concerned by the following actions of Respondents: (i) Misrepresentations and omissions were contained in the unrestricted marketing materials supplied by Respondents to Greg Porter, who in turn, having been cloaked with apparent authority by Respondents, presented the misleading materials to Claimant. This wrongdoing was caused by Respondent Merrill Lynch, Pierce, Fenner & Smith Incorporated’s inadequate supervision before the fact and aggravated by its failure to take corrective action after it received notice of the communications; (ii) Respondents’ manner of using the Personal Investment Advisory Questionnaire as a disclosure device was misleading and had the capacity to deceive. Respondent Merrill Lynch, Pierce, Fenner & Smith Incorporated’s continuing approval of this use constitutes inadequate supervision; and (iii) Respondent Merrill Lynch, Pierce, Fenner & Smith Incorporated’s failure to comply with its own ARMOR report procedures constitutes a breach of its duties toward Claimant and another example of inadequate supervision.” (See FINRA Arbitration Award). In the Award, the Arbitration Panel further stated, “This list is not all-inclusive but is intended to give Respondents the benefit of some of the Panel’s conclusions so Respondents can modify their conduct accordingly.” (See FINRA Arbitration Award). The FINRA arbitration award against Merrill Lynch and Phil Scott consisted of $1,100,000 in compensatory damages, $540,144 in attorneys’ fees, along with costs in the amount of $74,341.
On August 23, 2012, Lax & Neville LLP, a leading national securities arbitration law firm, won a FINRA arbitration award against Morgan Stanley Smith Barney for failing to pay two of its current employees their earned back-end bonuses. In the case won by our firm, FINRA Case No. 11-02261, the Panel awarded the Claimants, Richard M. Schwartz and Alan Jacobson, the entire amount of compensatory damages they were seeking, $263,219, plus 9% interest from October 5, 2010 until the Award is paid in full. This equitable result is a win for these two financial advisors who were not paid their earned compensation.
If you are a financial advisor who has not been paid your back-end bonus, or any other due compensation, please contact Lax & Neville LLP at (212) 696-1999 to discuss your potential matter.
To view this Award, click [ here].
Lax & Neville LLP successfully wins a summary judgment motion in a case defending Cindy Smith, an employee of Raoul's Restaurant Corp., a well-known restaurant in New York City. On May 30, 2012, the Honorable Louis B. York granted Ms. Smith's motion for summary judgment and directed entry of judgment in favor of Ms. Smith. Specifically, Judge York dismissed the Plaintiff's age discrimination and defamation claims against Ms. Smith.
Dr. Karabi Sinha vs. UBS Financial Services, Inc. - FINRA No. 10-02584
On April 25, 2012, Lax & Neville LLP and Deutsch & Lipner, both leading securities arbitration law firms, won a FINRA arbitration award against UBS Financial Services, Inc. for improper sales practices and fraud in connection with UBS's marketing and sale of a Structured Product - the Lehman Return Optimization Security tied to the S&P 500. UBS is reported to have sold as much as $1 billion of Lehman's Structured Notes to its customers. It also sold other Structured Products which were mis-marketed and sold to UBS customers in inappropriate ways.
In the case won by our team, FINRA Case No. 10-02584, the Panel awarded the Claimant damages of $154,479, plus interest from October 1, 2008 until the Award is paid in full. The award places our client in the exact same position she would have been in had Lehman not filed for bankruptcy. The Award grants her damages equal to the value the security would have had on the maturity date if Lehman had not filed bankruptcy, less the current value of the security.
This equitable result is another win for our many clients who were deceived when the product was sold to them. The Statement of Claim in the case alleged that UBS did not inform the Claimant that these supposedly principal-protected securities were in fact the unsecured debt of the then-troubled Lehman Holdings, and that UBS did not inform its clients about what it (UBS) knew about Lehman's troubles. UBS tried to defend the case by alleging it had made full disclosure, and that the sales had been made in December 2007 -- which UBS alleged was before Lehman's troubles were known. As it had in every other prior case in which our legal team was involved, the arbitrators rejected UBS's defenses.
To view this Award, click [ here].
John J. Baker, Natalie N. Baker and John Baker, as Personal Representative of the Estate of Harriet B. Baker vs. Merrill Lynch Pierce, Fenner & Smith, Incorporated - Index No. 11-108492
Justice J. Lobis of the Supreme Court of the State of New York has denied Merrill Lynch's Motion to Vacate an $880,000 FINRA Arbitration Award against Merrill Lynch for purported sales practice abuses concerning the Merrill Lynch Phil Scott Team and the Merrill Lynch Phil Scott Team Income Portfolio. In its Decision, the Court stated, "there is no basis for the court to vacate the Award...Respondent has not made a showing that it was subject to a fundamental unfairness such that it was deprived of a fair hearing." Accordingly, the Court confirmed the FINRA Arbitration Award against Merrill Lynch. During the arbitration process, Lax & Neville LLP focused on the Merrill Lynch Phil Scott Team's disregard of industry and regulatory obligations. The Claimants asserted that the Merrill Lynch Phil Scott Team ignored the Claimants' individual risk tolerances and investment objectives when it recommended that 100% of Claimants' assets be invested in the Merrill Lynch Phil Scott Team Income Portfolio, which consisted of 100% equities. The FINRA Arbitration Award, which was rendered against Merrill Lynch on June 23, 2011, awarded the Claimants $880,000 in compensatory damages, and granted Claimants' Motion for Sanctions "assess[ing] fees for hearings on discovery to Respondent as sanctions against Respondent for untimely compliance with the Panel's orders to compel the production of documents."
Lax & Neville successfully defends appeal of a significant American Arbitration Association ("AAA") award against Petrocom Limited and Petrocom Energy Limited ("Petrocom") (中港印能源集团有限公司("中港印"). Lax & Neville represented Westminster Securities Corporation ("Westminster") before the Second Circuit Court of Appeals, which has affirmed the ruling of Judge Cote in the Southern District Court of New York confirming the AAA arbitration award against Petrocom, a Chinese coal blending company. In the underlying arbitration, the Tribunal determined that Petrocom wrongfully failed to pay fees and issue warrants when Westminster successfully raised over $55 million for Petrocom and its Chairman and Chief Executive Officer, Mr. Howard Au (区可). Specifically, the Tribunal awarded Westminster approximately $10,400,000 in damages, which included placement agent compensation, attorneys' fees and costs and a $50,000 sanction against Petrocom for its "flouting" of the Tribunal's Order to have John P. O'Shea appointed to the Board of Directors of Petrocom, plus a total of 4,080,000 in Warrants. Based upon shareholder reports from Petrocom a reasonable valuation for these warrants is believed to be $2.00 per warrant (at a minimum), the total damages awarded to Westminster exceeded $10 million. The Second Circuit Panel held that the Tribunal's Award should be affirmed since the Tribunal provided a colorable justification when denying Petrocom's argument that the tail provision only applied when the placement agreement was terminated, and not when it expired. The Second Circuit Panel reasoned that the placement agreement's survival clause extended the tail provision in the event of termination or expiration, and therefore, Westminster was owed fees by Petrocom. The Second Circuit Panel also held that contrary to Petrocom's argument, Westminster's unjust enrichment clause was encompassed in the parties' agreement to arbitrate since the parties' arbitration agreement was worded broadly. Since Petrocom was enriched by Westminster's efforts to introduce several potential investors, the Second Circuit held that Westminster's unjust enrichment claim clearly related to the parties' placement agreements, and therefore the claim was governed by the arbitration clause.