Anthony Ostlund partner Steve Phillips recently obtained a complete dismissal of all claims against a securities brokerage firm.
A customer sued the firm asserting multiple tort claims relative to a concentrated equity position resulting from the exercise by the customer of employee stock options utilizing a margin loan provided by the firm. Among other things, the customer alleged that the broker failed to recommend or implement hedging strategies to avoid downside risk and recommended unsuitable investments, and the firm failed to supervise the activity.
Following a four-day hearing, a panel of FINRA arbitrators dismissed all claims with prejudice and recommended that all references to the arbitration be permanently expunged from the involved stock broker’s industry records. The panel concluded that the broker and brokerage firm were not responsible when the customer suffered a total loss on his single investment position following a sharp decline in the price of the stock. In its ruling, the panel affirmed that the broker gave the customer sound advice and was under no obligation to provide advice on an ongoing basis or to recommend hedging strategies after the customer rejected the broker’s advice.