Florida FINRA Arbitration Panel Decision: Wells Fargo Liable for Material Misrepresentations, Unsuitable Investment Losses
On January 14th, 2019, a FINRA arbitration panel based in Orlando, Florida ruled in favor of two investors — a husband and wife — in a claim against Wells Fargo (FINRA Office of Dispute Resolution: CASE #: 18-02123). The allegations in this case were centered around supposed misrepresentations that were made to the investors regarding two brokerage certificates of deposit (CDs).
The investors alleged that they were falsely informed that the CDs could be redeemed at any time, with no losses or penalties and with the full amount of accrued interest. As that was not the case, they brought a claim for material misrepresentations and unsuitable investments.
In reviewing the claim, the panel awarded $4,600 in compensatory damages for losses and expenses. This award accounts for damages that were deemed to be the fault of the brokerage firm. Through a FINRA arbitration claim, broker-dealers can be held liable when an investor sustained losses as a result of financial advisor negligence or financial advisor fraud.
What Investors Need to Know About FINRA’s Suitability Requirements
Registered brokers and broker-dealers must comply with the securities industry suitability rule. Under FINRA Rule 2111, representatives should always have a reasonable basis that a recommended trade, financial product, or investment strategy is actually appropriate for their individual client. Of course, by definition, investment opportunities that are suitable for some investors are not necessarily suitable for all investors — or even for most investors. Financial advisors must take proactive steps to understand the unique background, financial position, and investment objectives of their customers. If they fail to do so, they could be held liable for any resulting losses.
While FINRA arbitration panels generally do not provide full details regarding why they decided to grant (or deny) an award, they do provide information on many of the basic facts and basic allegations. In this case, the investors claimed that they were promised that the two CDs they were sold could not lose money. Certain investors want financial security above all else. Under FINRA’s suitability requirements, brokers and brokerage firms must adjust their guidance to account for an investor’s risk tolerance. If the most important thing to an investor is preventing loss and preserving their initial capital, then financial professionals need to make sure that all general investment advice and any specific recommendations are fully consistent with the investor’s objectives. Most investment opportunities are not suitable for very conservative investors.
Get Help From an Unsuitable Investments Lawyer in Miami, FL
At Carlson & Associates, P.A., our skilled Miami securities fraud lawyers have extensive experience handling unsuitable investment claims and other broker negligence claims. We represent clients in securities litigation, securities mediation, and securities arbitration.
Our law firm is committed to fighting for the rights and interests of investors throughout Southeastern Florida. To set up your confidential case evaluation, please do not hesitate to call our law office at 1 (305) 372-9700 or to reach out to us through our website.
Resource:
finra.org/sites/default/files/aao_documents/18-02123.pdf