Finra turnabout: Client and son ordered to pay for "frivolous’ claim
In an unusual case, a Financial Industry Regulatory Authority Inc. arbitration panel last week ordered two investors to…
In an unusual case, a Financial Industry Regulatory Authority Inc. arbitration panel last week ordered two investors to pay brokerage firm Quincy Cass Associates Inc. and broker Jens Adolf Spitta $75,000 in legal expenses.
In its award, the panel called the investors’ claims “frivolous” and “a bad-faith abuse of the Finra arbitration process.”
The award also ordered the claimants, Karl Heinrich Vogelbach and his son, Andrew Vogelbach, to pay $6,000 of the $7,200 in forum fees.
CASE TO BE EXPUNGED
In addition, the arbitrators ordered expungement of the case from Mr. Spitta’s disciplinary record.
The firm and Mr. Spitta incurred about $110,000 in costs, the panel said.
The panel said that Karl Vogelbach was “wealthy, financially sophisticated, and aggressive in his approach to investing,” and the “causes of his losses were his own independent decisions and market risks.”
Regarding Andrew Vogelbach, “not a scintilla of evidence” was presented in the case to demonstrate that he had a contractual relationship with either of the respondents, the award said.
Andrew Vogelbach wasn’t a client of Mr. Spitta’s or Quincy Cass’, said Sylvia Scott, a partner at Freeman Freeman & Smiley LLP, who represented the respondents.
The case is unusual in ordering investor claimants to pay legal costs. Arbitrators usually dismiss weak cases without awarding any damages.
“I think this award sends a strong message [to claimants who] bring a demonstrably frivolous lawsuit,” Ms. Scott said.
“We disagree with the award and are looking at our options,” said the Vogelbachs’ attorney, J. Christopher Wehrle, founder of Wehrle Law LLC.
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