TAMPA – A Florida-based firm has been awarded over $1 million following a Financial Industry Regulatory Authority (FINRA) arbitration.
Goodman & Nekvasil, P.A. won a FINRA arbitration award against Source Capital Group on Feb. 3 while working on behalf of three retirees, William B. Lashlee and Keith and Joyce A. McCrea. Lashlee is an 88-year-old retired native of St. Simons Island, Georgia, and the McCreas are a retired couple who live in Yorkville, Georgia.
Both groups alleged they were sold unregistered and unsuitable investments in IPG stock by Joseph Hooper, who was working as a representative. Lashlee invested $220,000 and the McCreas invested $590,000 for a combined total of $810,000 in IPG stock. Their problems peaked in January 2013 when IPG filed for bankruptcy, and both Lashlee and the McCreas lost their investments, the law firm said.
Both groups alleged that Source Capital displayed negligent behavior when the company failed to provide adequate supervision to Hooper, who was assigned to a Bowling Green, Kentucky, Source Capital branch office. According to the complaint, Goodman & Nekvasil alleged the local office manager was derelict in his duties by failing to take proper responsibility for Hooper's behavior.
To resolve this dispute, both parties turned to FINRA, a nonprofit organization that works to ensure that rules and regulations are enforced in the financial sector and provides conflict resolutions through mediation and arbitration for securities-related disputes, Michele Ong, director of media relations at FINRA told the Florida Record.
“FINRA specializes in cases that involve arbitrations and mediation between securities companies and their customers,” she said. “Most securities organizations make an agreement with their investors where they both decide to resolve any disputes between them first through mediation and if that fails then through binding arbitration.Typically, the steps involved require the participating parties to agree to a list of arbitrators, which is then followed by a discovery process.”
The FINRA arbitration panel found in favor of Lashlee and the McCreas and awarded them $810,000, the cost of their out-of-pocket losses. In addition, the panel awarded them the cost of their prejudgment interest on the lost sum, totaling $66,989.04 for Lashlee and $80,239.73 for the McCreas.
“I would say it is fairly uncommon for a case to go all the way to arbitration award,” Ong said. “My guess is that roughly 80 percent of them settle before this phase.”
The panel also assessed Source Capital with $20,000 in sanctions for its violation of the its discovery orders, and then fined the company again for $24,630.36 in costs and $250,000 in attorneys' fees.
“The FINRA arbitration panel determines how to assess fault by working as neutral observers making sure that everyone involved follows the agreed upon arbitration code,” Ong said. “Then the panel decides on the final arbitration award and announces it to the public.”
The final total award to both parties equaled $1,104,630.36.
"This award shows that arbitration panels will make broker-dealers pay when the evidence shows a complete breakdown of supervision," Kalju Nekvasil of Goodman & Nekvasil said.