FINRA Arbitration Panel Metes Out Harsh Punishment for Elder Fraud


In an encouraging sign to those who despair about investors receiving full justice in a compulsory arbitration process financed by the brokerage industry, a California FINRA panel last month (December 2009) awarded compensatory damages of $319,798 to a 96-year old investor as well as treble damages of $959,394 under the California Elder Abuse Act.

Described as “a rarity” by Investment News’ Bruce Kelly in a January 4th article, the award also included pre-and post-judgment interest, attorneys’ fees of $233,944, and costs, including expert witness fees, in excess of $82,000. In addition, all hearing session fees were assessed against the Respondent, Stockcross Financial Services, a “discount brokerage firm” according to Investment News.

According to the award, the investments were GMAC bonds and “Smart Notes” and FNMA and GNMA Mortgage Preferred Series and “pass-throughs,” all bought on margin.

Perhaps most telling was the award’s multi-page description of the discovery abuses plaguing the case. The panel sanctioned Claimant almost $3,000 and Respondents $10,000.

Page Perry partner Steve Parker, a member of the Georgia State Bar’s Elder Law Section, commented as follows: “It is encouraging to see arbitrators enforce an elder-abuse statute. When the facts of a particular case justify such an award, it serves as a powerful deterrent to prevent financial abuse of seniors in the future. This award underscores the important role that arbitrators have in protecting the public and maintaining the integrity of our capital markets.”