Indianapolis Panel Orders Merrill Lynch To Pay $2.5 Million To Investor

In an interesting case, a Financial Industry Regulatory Authority (FINRA) arbitration panel in Indianapolis, Indiana has found Merrill Lynch liable and ordered them to pay over $2.5 million in compensatory damages to an investor. According to the award, the Claimant asserted various causes of action including misrepresentation, mismanagement, breach of contract, breach of fiduciary duty and negligent supervision, among others.

The case is unique in that it involves losses in the Claimant’s accounts which were the result of monies being taken out of the account and trading by Claimant’s spouse, who was not authorized to trade the account. Obviously, this type of claim raises a whole different set of issues with the brokerage firm regarding the responsibility of the brokers and the firm’s supervisors to protect a customer’s account from unsuitable and unauthorized trading by another person, without prior consent or authority.

In this case the arbitration panel obviously concluded that Merrill had breached its duties to exercise due diligence and care in connection with the Claimant’s IRA accounts, by finding them liable and ordering Merrill to pay $2,507,000 in compensatory damages, $5,200 in costs and all of the $7,200 in forum fees of the arbitration. (FINRA# 10-01198; Steven E. Wdowka, Individually and on behalf of his IRA’s v. Merrill, Lynch, Pierce, Fenner & Smith, Inc.)

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