Merrill socked with $39.8M arbitration ruling

In one of the single largest securities arbitration awards ever, Merrill Lynch & Co. Inc. has been ordered pay $39.8 million to a group affiliated with the Freemasons.
MAR 30, 2009
In one of the single largest securities arbitration awards ever, Merrill Lynch & Co. Inc. has been ordered pay $39.8 million to a group affiliated with the Freemasons. The arbitration award, handed down by a three-member panel of the New York- and Washington-based Financial Industry Regulatory Authority Inc., ruled March 16 that Merrill Lynch of New York is liable for $30.6 million in compensatory damages — plus interest — to the Trustees of the Masonic Hall and Asylum Fund in Utica, N.Y. The interest on the claim dates back to November 2005 and totals $9.2 million. The fund alleged that Merrill Lynch and its subsidiary broker-dealer Advest Inc. of Hartford, Conn., committed negligence, breached their contract and fiduciary duty, and also misrepresented information about the SPhinX Managed Futures Index Fund LP. Sphinx was a privately held fund of a business unit of the defunct commodities trader Refco Inc. of New York and was one of a group of funds that promised investors returns tied to the performance of the Standard & Poor’s Hedge Fund Index, according to published reports. It's one of the largest Finra arbitration awards ever, said Richard Ryder, editor of the Securities Arbitration Commentator, based in Maplewood, N.J. “It’s easily top 10, perhaps top five,” he said, adding that other awards may have been bigger, but were unpaid by a defunct firm or broker. It was not clear how Advest or Merrill Lynch brokers sold the Refco fund to the non-profit group. The Finra award gave scant detail about the case, and the lawyer for the Masonic group, Brian J. Butler, did not make a copy of the group’s suit against Merrill Lynch available. A Merrill Lynch spokesman, William Halldin, said the firm is “disappointed with the decision, which we believe runs counter to the facts and the law.” “This case arose from investments that predated Merrill Lynch's acquisition of Advest,” Mr. Halldin wrote in an e-mail. “The panel did award us rights to claims in the SPhinX Managed Futures insolvency and bankruptcy proceedings, and related matters, and we will pursue those claims.” Merrill Lynch’s acquisition of the Advest Group Inc. in 2005 at the time was widely reported as one of the most difficult and contentious deals in recent years, with Advest brokers leaving in droves. Mr. Halldin added that the events in the claim occurred before Merrill bought Advest, therefore a Merrill Lynch adviser was not involved in the matter.

Latest News

In an AI world, investors still look for the human touch
In an AI world, investors still look for the human touch

AI is no replacement for trusted financial advisors, but it can meaningfully enhance their capabilities as well as the systems they rely on.

This viral motivational speaker can also be your Prudential financial advisor
This viral motivational speaker can also be your Prudential financial advisor

Prudential's Jordan Toma is no "Finfluencer," but he is a registered financial advisor with four million social media followers and a message of overcoming personal struggles that's reached kids in 150 school across the US.

Fintech bytes: GReminders and Advisor CRM announce AI-related updates
Fintech bytes: GReminders and Advisor CRM announce AI-related updates

GReminders is deepening its integration partnership with a national wealth firm, while Advisor CRM touts a free new meeting tool for RIAs.

SEC charges barred ex-Merrill broker behind Bain Capital private equity fraud
SEC charges barred ex-Merrill broker behind Bain Capital private equity fraud

The Texas-based former advisor reportedly bilked clients out of millions of dollars, keeping them in the dark with doctored statements and a fake email domain.

Trump's tax bill passes senate in hard-fought victory for Republicans
Trump's tax bill passes senate in hard-fought victory for Republicans

The $3.3 trillion tax and spending cut package narrowly got through the upper house, with JD Vance casting the deciding vote to overrule three GOP holdouts.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.