Osaic prevails in massive investor lawsuit involving ex-broker facing FINRA inquiry

A broker-dealer owned by the precursor to Osaic Holdings, a giant network of B-Ds and registered investment advisors, prevailed last week in a lawsuit stemming from private, high-risk investments sold by a former financial advisor currently being sued by FINRA.

The claim was filed in February 2024 on behalf of dozens of former clients of Jim Walesa, who registered at Triad Advisors from 2000 to 2019 and then Arkadios Capital for two years before leaving the industry. He was based in Park Ridge, Ill.

Investors who made the claim against Triad - and lost - were seeking as much as $34 million in damages, according to Walesa’s BrokerCheck report. 

Triad was part of the Ladenburg Thalmann network of broker-dealers, which was bought in 2020 by Advisor Group and recently rebranded and consolidated under the banner of Osaic.

The three-person FINRA arbitration panel decision was made public last Wednesday and shocked some in the industry, particularly those who watch such legal and FINRA arbitration cases closely.

Panels have been giving significant damages to investors over the past year or more, they noted, and FINRA’s investigation into Walesa’s sales of shares in private companies likely indicated investors were to get some money in damages.

The investors claimed unsuitable investment recommendations, failure to supervise, violation of common law fraud, breach of fiduciary duty, negligent failure to supervise and negligence, according to the award.

The investors’ lawsuit pointed to a number of conflicts of interest related to the “allegation that Walesa created various business enterprises where he owned, operated or otherwise directed those business and for which he raised funding by creating and operating various limited partnerships,” according to the arbitration award.

Those investors “alleged that Walesa also operated as the broker executing the transactions for those investors placing their funds into these alternative investment vehicles that Walesa was creating,” according to the award.

The three arbitrators gave no explanation for determining claimants were to receive no damages in the matter.

“I just don’t get how the arbitrators made this decision,” said one industry executive, who spoke privately to InvestmentNews about the matter.

Dax White, the plaintiff’s attorney in the claim, did not return a call Tuesday morning to comment. A spokesperson for Osaic declined to give comment.

Osaic will continued to face investor complaints involving Walesa. Over the summer, it settled with one group of his clients who sued the firm for $9.75 million.

According to FINRA’s complaint, which was filed against Walesa in August with FINRA’s internal Office of Hearing Officers, the former advisor in 2020 recommended that an 85-years-old client invest $200,000 from the family trust in the highly speculative Clearday.

The client passed away three weeks later.

Walesa later recommended the client’s daughter invest $100,000 from the family trust into Clearday, which was then called AIU Alternative Care Inc., according to FINRA.

The family in 2023 then filed a lawsuit – or statement of claim – alleging its investment in Clearday was worthless. Walesa disclosed his role with the company as CEO and chairman, but with the outside company, and stated it was not investment related, according to FINRA.