Finra arbitrators award more than $4 million in case against rogue broker

The settlement would make the harmed investors whole, but can they collect?

Jan 23, 2018 @ 2:05 pm

By Mark Schoeff Jr.

Finra arbitrators awarded more than $4 million to a group of investors who say a notorious rogue broker put their retirement savings into risky, unsuitable investments.

But the satisfaction of winning the case may be their only reward.

In a Jan. 19 decision, the arbitrators awarded $4.3 million to 17 plaintiffs in their case against broker Anthony Diaz and the firm he worked at, First Allied Securities Inc. Mr. Diaz, who failed to appear at the arbitration proceedings and was not represented by an attorney, must pay $1.033 million in compensatory damages, $2.9 million in punitive damages and $413,266 in attorneys fees.

Mr. Diaz could not be reached for comment.

The plaintiffs accused Mr. Diaz of fraud and negligent misrepresentation, among other causes of action.

The investors were mostly elderly, and their retirement nest eggs were put into an investing strategy "laden with private placements," said their attorney, Adam Gana, managing partner at Gana LLP.

"The award pretty much renders them whole," Mr. Gana said. "We have to go collect that money now. We're looking at all possible avenues to collect this money from him."

That may pose a bigger challenge than defeating Mr. Diaz in the arbitration proceedings. Barred by the Financial Industry Regulatory Authority Inc. from the industry in 2015, he has 53 regulatory and customer-dispute disclosures on his BrokerCheck profile.

"Chances are [the plaintiffs] are not going to collect a dime," said Andrew Stoltmann, a Chicago securities attorney and president of the Public Investors Arbitration Bar Association. "It's going to go into that 30% of arbitration awards that go unpaid every year."

Unpaid arbitration claims have been an ongoing problem for Finra, the brokerage industry self-regulator. Last year, the Finra board advanced a proposal that would give arbitration participants greater latitude to take their claim to court, if the accused brokerage or broker "became inactive during a proceeding." Critics said the idea fell short because it didn't create a pool of money to cover unpaid awards.

Finra president and CEO Robert Cook has said the organization will continue to work on the problem.

Despite Mr. Diaz's checkered disciplinary history, he was employed by 11 firms over the 14 years he worked as a broker. His ability to land at a new firm no matter how often he was fired made him the subject of an Associated Press story in 2016.

Finra has implemented a high-risk broker program to target rogue brokers and the firms that hire them.

Brokers like Mr. Diaz "are the guys who are in the crosshairs of Finra right now," Mr. Stoltmann said. "Like cockroaches, they scatter to other firms."

Most of the plaintiffs worked with Mr. Diaz in East Stroudsburg, Pa. They settled separately with First Allied Securities on Nov. 3, 2017. Mr. Gana declined to provide the details of that agreement.

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