Finra arbitrators award $1 million to client in churning case

Barred firm Legend Securities Inc. was 'Wild Wild West,' attorney asserts

Nov 28, 2018 @ 4:29 pm

By Mark Schoeff Jr.

Arbitrators with the Financial Industry Regulatory Authority Inc. awarded more than $1 million to a client who claimed that his accounts were churned at the now-defunct brokerage Legend Securities Inc.

The three-person all-public arbitration panel took the unusual step of awarding Herbert W. Voss $700,000 in punitive damages in addition to $375,000 in compensatory damages for a total of $1.075 million.

The punitive damages were justified because of the egregious amount of turnover in Mr. Voss' account, according to his attorney, Timothy J. Dennin, owner of an eponymous law firm.

"There was ridiculous churning," Mr. Dennin said. "There's no way this account could have been profitable. It was only to line the brokers' pockets."

Mr. Voss lost $375,000 — all but $10,000 he invested with the firm.

The Finra arbitrators held Legend Securities and broker Danard Warthen Brown liable for $350,000 in compensatory damages and Mr. Brown and Frank Philip Fusco, the firm's chief compliance officer, liable for $25,000 in compensatory damages.

"It was like the Wild Wild West in terms of lack of controls at the firm," Mr. Dennin said. "It was unconscionable."

Fnra expelled Legend Securities from the industry in April 2017, according to its BrokerCheck profile. The firm, which was headquartered in New York City, had 22 regulatory and 10 arbitration disclosures.

Mr. Brown and Mr. Fusco are still working at brokerages. Mr. Fusco declined to comment when reached at Dawson James Securities Inc.

No match for Mr. Brown's name was found in the electronic telephone directory at Joseph Stone Capital, where his BrokerCheck profile says he's employed now.

In addition to Mr. Brown and Mr. Fusco, Mr. Voss made claims against Legend chief executive Anthony Fusco, Salvatore Charles Caruso and Michael Salvatore Stanton.

The cases against Anthony Fusco and Mr. Caruso were stayed because both of them declared bankruptcy this year after Mr. Voss filed his arbitration claim in April. Mr. Voss reached a settlement with Mr. Stanton.

With the firm out of business and two of his targets in bankruptcy, it could be difficult for Mr. Voss to obtain his award.

"That's going to be an issue," Mr. Dennin said.

(More: Finra panel awards clients $5 million for churning, but from defunct brokerage)


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