by Brian Mahany
Everyone loves a good David versus Goliath story, especially where the winner is a woman in her 80’s and the villain is a Wall Street giant. Harriet Baker and her son won $880,000 against Merrill Lynch for mismanaging her brokerage account. The sad news is that she died the day the award was made.
A FINRA arbitration panel decided that her stockbroker, Phil Scott & Merrill Lynch, had made unsuitable recommendations for her account. When the market crashed in 2008, Harriet’s account dropped severely.
Stockbrokers have an obligation to make recommendations to their clients that are “suitable.” In determining what is suitable, a broker must consider your risk tolerance, financial situation, future needs and investment objectives. There is a great difference in investments suitable for conservative older customers who expect their portfolio to fund their retirement and investments that can be recommended for a younger, more risk tolerant investor who has no immediate needs for the money.
Ms. Baker’s broker, Phil Scott, apparently had all his customers 100% invested in stocks. While Scott and Merrill Lynch say they did nothing wrong, the panel disagreed.
Most disputes between customers and stockbrokers are arbitrated. New account agreements typically have a clause indicating that the customer waives the right to take any dispute to court. Instead, disputes must be determined by a panel of arbitrators appointed by the Financial Industry Regulatory Authority or FINRA for short.
Ms. Baker and her family initially sought much more money and punitive damages. The decision by the panel is an important win for customers but demonstrates that the panel thought Ms. Baker was not entirely free from blame.
Phil Scott is one of Merill Lynch’s top performers. Although he has other pending complaints, he remains employed by the brokerage firm.
If you were harmed by bad advice from a stockbroker or had your investments mismanaged, contact an experienced investment fraud lawyer. In many cases, the dispute can be handled on a contingent fee basis meaning no legal fee unless there is a recovery.
Mahany & Ertl, LLC – America’s Fraud Lawyers. Offices in Milwaukee, Detroit, Portland & San Francisco. Services nationwide.