by Brian Mahany
Chalk up another victory for the good guys. Over a year ago, we were quite excited when an arbitration panel for the Financial Industry Regulatory Authority – FINRA – issued a $64 million decision against Bank of America subsidiary Merrill Lynch Professional Clearing Corp. The euphoria was short lived as ML immediately appealed the decision.
We are not fans of big banks. Bank of America is referred to as the “Death Star” around the office after its history of destroying homeowners and small businesses. That an industry organization such as FINRA would hit Merrill Lynch with such a huge verdict was big news.
Whether an individual or business, when you open a brokerage account you agree to resolve any disputes by arbitration. That means you can’t sue your stockbroker. If you have a complaint, it is usually decided by 3 arbitrators selected from a panel supplied by FINRA. Overall, we think the system is fair even though every panel has an industry representative.
There are pluses and minuses in the arbitration regime. It is usually much quicker than a law suit and the panelists know the industry. On the other hand, arbitration panels are reluctant to award punitive damages. Unlike court cases which can stretch out for over a decade with appeals, there are no appeals in a FINRA arbitration.
Or so we thought. Recently, several brokerage firms have sought to appeal FINRA decisions when they don’t like the result. The arbitration program is something they created yet when it doesn’t work in their favor, they scream “foul.”
That’s not fair and the few courts that have dealt with these appeal attempts almost always shut them down. This case was no exception. Earlier this week, a California appeals court upheld the award against Merrill Lynch. The court ruled that the FINRA arbitration panel did not overstep its bounds in making the award and had adequate evidence to support the award.
Now that both an arbitration panel and an appeals court have ruled, we sincerely hope that Bank of America just pays it. One thing that may convince them to do so is the 9% annual interest ordered by the arbitrators. The interest alone is in the millions of dollars per year.
If you lost money to a stockbroker and believe your account was mismanaged or you were recommended unsuitable investments, give us a call. Most cases can be handled through arbitration and resolved in 14 months or less. Stockbroker fraud cases are routinely handled on a contingent fee basis meaning you don’t pay attorneys fees unless we win and recover money for you.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Services available in many locations.
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