A stunning major award was recently announced in that has investors, financial professionals, and securities lawyers on both the plaintiff and defendant sides gawking. Last week, a Financial Industry Regulatory Authority arbitration panel awarded an Illinois family a whopping $2.3 million against the three top executives of now-defunct Virginia-based brokerage firm, Allied Beacon Partners, Inc. The award is remarkable not only for its size but because the executives themselves are on the hook for the damages. Trust us, this hardly ever happens.
Typically, aggrieved investors seek restitution through the FINRA arbitration process, and if they win (which they do less than 50% of the time), the award is generally ordered to be paid by the brokers who (mis)managed the investor accounts or by the offending firm. It is rare for investors to seek recovery from executives of a firm, and extremely rare for them to win.
In this case, the Bosco family originally brought their case against Allied Beacon Partners as a firm, for steering the family’s investment funds into two companies that were allegedly running Ponzi schemes (Medical Capital, LLC and Shale Royalties). The Boscos won that arbitration last year, with an award of $1.6 million. Unfortunately for them, however, Allied Beacon Partners closed rather than pay. Fast forward several months, and the Boscos brought a new FINRA claim over the Ponzi schemes, this time against the three principals of Allied Beacon Partners personally. In the new claim, they named Robert Mather, former chief executive of Allied Beacon; Roger Leibowitz, firm treasurer, and Richard Landi, head of operations. Incidentally, these three individuals continue to work in financial investment world.
Evidently, the FINRA arbitration panel reviewing the claim found the execs’ misconduct so egregious that they rendered a decision against them, for an even greater amount in damages and interest: $2.3 million. Attorneys for the three executives were stunned. And, quite frankly, we’re stunned as well. But as plaintiff attorneys we’re stunned in positive way. The panel’s award, as unusual as it is, sends a strong message to brokerage firm principals that they can’t just skip out on injured investors because they pack up their firm and move on. It’s a happy day indeed for the Bosco family, and encouraging news all around for investors.
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