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Coral Gables, FL 33134

Miami, FL FINRA Arbitration Panel Awards Two Investors More than $3 Million in Compensation

On July 16th, 2019, a FINRA Arbitration Panel based in Miami, Florida issued a decision in favor of a pair of investors in a dispute filed against Morgan Stanley Smith Barney, LLC (Case Number: 17-01908).

In total, the panel awarded the investors nearly $3.3 million — much of it because it found that the respondent, Morgan Stanley, knowingly failed to comply with FINRA’s discovery rules. In this post, our Miami investment fraud lawyers provide an overview of this arbitration proceeding.

The Allegations: Illegitimate Losses in Puerto Rico Government Bonds  

The claimants in this case contend that they suffered unfair and illegitimate investment losses in Puerto Rican government bonds and in Puerto Rico closed-end bond funds. Notably, these financial products, which were often marketed to investors as being “safe” and “secure”, suffered tremendous financial losses in recent years. Specifically, the investors raised the following causes of action against Morgan Stanley:

  • Breach of fiduciary duty;
  • Broker negligence;
  • Negligent supervision of a broker;
  • Financial advisor fraud;
  • Breach of contract;
  • Violation of federal securities law;
  • Violation of the Florida Securities and Investor Protection Act; and
  • Violation of the Puerto Rico Uniform Securities Act.

The FINRA arbitration claim at issue in this case is somewhat unique, as the investors made a strong claim for an award of punitive damages on top of their actual financial losses. According to the claimant, Morgan Stanley’s conduct impeded their ability to fully investigate the fraud and to bring a legal claim. 

The Award: Punitive Damages for Discovery Violations   

After reviewing the evidence presented by the parties, the Miami, FL FINRA Arbitration Panel awarded $261,420.63 in compensatory damages to the investors. Additionally, the investors were also granted $3,000,000.00 in monetary sanctions (punitive damages). While punitive damages are not often granted in FINRA arbitration proceedings, they can be awarded in cases in which the respondent engaged is especially wrongful behavior.

In this case, the Miami FINRA Arbitration Panel determined that the defendant (Morgan Stanley) failed to comply with the terms of a discovery order. The Panel found this to be a very important consideration —  among other things, the willful lack of compliance with the discovery rules denied the investors an opportunity to obtain documentary evidence that deemed to be highly relevant to the case. The evidence pertained to a former financial advisor of Morgan Stanley who allegedly engaged in significant misconduct and who has since been terminated by the brokerage firm.

Discuss Your Investment Fraud Claim With Our Miami, FL FINRA Arbitration Lawyers Today

At ​Carlson & Associates, P.A., our Florida FINRA arbitration attorneys have extensive experience representing investors in the full range of securities fraud cases. If you suffered losses with Morgan Stanley or any other broker-dealer, we are here to help. For a completely confidential review of your investment fraud claim, please call us today. With an office location in Miami, we serve investors throughout Florida.




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Coral Gables, Florida 33134

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