In a rarity, an arbitrator last month cited elder abuse in tripling the damages a discount securities firm must pay a 95-year-old client.
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Financial Industry Regulatory Authority panel awarded the elderly investor, David Wolfson, $1.6 million in a case involving StockCross Financial Services Inc. of Beverley Hills, Calif. Mr. Wolfson accused StockCross, along with two of its brokers, of misconduct and self dealing. He claimed the brokers recommended and solicited unsuitable and overly risky investments that were actively traded on margin.
The claim, which was filed in March, also alleged that StockCross and the two brokers, Thomas B. Cooper and Peter L. Boorn, put Mr. Wolfson's home at risk. According to the complaint, they “encouraged and invited Mr. Wolfson to leverage the equity in his home with a reverse-mortgage transaction to utilize as investment capital.”
While many arbitration claims charge elder abuse, it is extremely rare for a Finra panel to cite such abuse in an award, said David Liebrader, an attorney who represents both investors and brokers against securities firm. Under California law, elder abuse entitles plaintiffs triple the damages.
According to the complaint, Mr. Wolfson was a client of Mr. Cooper for almost 20 years before Mr. Cooper dropped the account in 2008.
A footnote to the lawsuit alleged that Mr. Cooper “quit because he had bilked nearly all of Mr. Wolfson's assets—including the equity in his home, all his cash reserves, all his emergency/medical cash reserves and even the insurance money Mr. Wolfson received to replace his automobile—and there was nothing left to churn.”
The arbitrators awarded Mr. Wolfson $320,000 in compensatory damages and $960,000 in damages for elder abuse. They also awarded the 95-year-old $234,000 in legal fees, expert witness fees of $62,000, various costs of $21,000. In addition, the panel ordered StockCross to pay $10,000 for failing to follow discovery orders.
StockCross and the brokers will fight the decision and file a motion to vacate, said Martin H. Kaplan, the attorney filing the motion. Such motions to vacate are essentially court appeals of Finra arbitration awards, which are very difficult to overturn.
Mr. Kaplan, a partner with Gusrae Kaplan Bruno & Nusbaum PLLC, said the arbitration panel “exceeded its authority” in the matter and its decision against StockCross showed a bias because of its detailed discussion of the discovery process. He added that, as a client of an online discount brokerage, Mr. Wolfson conducted all the trades in his account.
