FINRA Arbitration Panel Awards Florida Investor $100,000 in Unsuitable Investment Claim

On August 29th, 2019, a Tampa-based FINRA Arbitration panel awarded $100,000 in compensatory damages to a Florida-based investor (FINRA Office of Dispute Resolution Case Number: 18-02477). Among other things, the investor in this case alleged that he suffered illegitimate investment losses as a result of unsuitable investment recommendations and lack of proper diversification.

Unsuitable Investment Claim: Lack of Proper Consideration of ‘Age’ and ‘Objectives’

The complaint in this case was brought against Stifel, Nicolaus & Company (CRD#: 793), a brokerage firm and investment advisor firm headquartered in St. Louis, Missouri. Stifel, Nicolaus & Company is licensed to operate in 53 U.S. states and jurisdictions. In the Statement of Claim submitted by the investors, a number of different causes of action were raised, including:

• Unsuitable investment recommendations;
• Overconcentration of investments;
• Breach of fiduciary duty;
• Failure to adequately supervise a securities representative;
• Breach of contract; and
• Violation of securities regulations.

The underlying investment product that was at issue in this case was securities of a company called Frontier Communications Corporation (FTR). Notably, the stock price of FTR has dropped dramatically in recent years. In fact, in early 2015, Frontier Communications stock was worth nearly $120 per share. However, by August of 2019, the price dipped below $1.00 per share — a loss of more than 99 percent.

The Florida investor who submitted this FINRA arbitration claim alleged that representatives of Stifel, Nicolaus & Company failed to properly take his “age” and “objectives” into consideration when recommending that he put his money into FTR securities. As a result, he alleges that his portfolio was over concentrated in this investment. When the stock price plummeted, he suffered large investment losses.

Brokers Must Offer Suitable Investment Advice to Investors 

Under securities industry rules, brokers and broker-dealers have a professional responsibility to use reasonable diligence in managing customer accounts and providing investment guidance. Among other things, this includes obtaining essential facts pertaining to customers. Brokers should consider an investor’s age, risk tolerance, sophistication, and long-term objectives. With this information, financial representatives should construct a suitable investment strategy.

When advisors recommend unsuitable financial products or investment strategies, they may be legally liable for resulting losses. In this case, the Tampa, FL FINRA arbitration panel determined that the brokerage firm failed to abide by its duties in advising the investor to purchase shares of Frontier Communications Corporation (FTR). As a result, the investor was awarded $100,000 in financial relief. As the brokerage firm failed to supervise its representatives, it is liable for the customer’s financial damages.

Discuss Your Case With a Miami, FL Unsuitable Investments Attorney Today

At ​Carlson & Associates, P.A., our Miami unsuitable investment attorneys represent clients in the full range of FINRA arbitration cases, including in unsuitable investment claims and in lack of diversification claims. To set up a completely private assessment of your securities fraud case, please contact us at our Miami law office right away. We represent investors throughout Southeastern Florida.

Resources:

finra.org/sites/default/files/aao_documents/18-02477.pdf

brokercheck.finra.org/firm/summary/793