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Stock Broker Fraud Case Nets $1.375 Million

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Incline Village, NVA stock broker arbitration case has returned a jilted investor his entire lost investment, plus interest. The case surrounded the placement of a sizeable investment into a high-risk product when the investor instructed his broker not to do so.

The Reno Gazette-Journal (3/9/12) reports that Bobby Hayes will receive an award totaling $1.375 million. The award represents the full amount of his initial investment, plus interest.

It was in 2007—a year before the market meltdown—that the retired businessman placed $883,122 with a stock broker, together with instructions not to bet the money on any kind of high-risk investment.

The broker proceeded to place the investor's money into a product that would earn Hayes eight percent interest, per year, over 12 years. However, unbeknownst to Hayes, the investor put the entire sum into what was described as a complex multi-level security known as a collateralized loan obligation—a risky move that went against the initial wishes of Hayes.

When the market tumbled a year later, Hayes' entire investment was lost. He sued, alleging stock broker fraud in a case heard before the Financial Industry Regulatory Authority (FINRA).

The stockbroker arbitration lawsuit was heard over the course of three days last year, with Hayes alleging breaches of written and oral contracts, and fiduciary duty, fraud, negligence and state securities violations. The defendants in the case, Banc of America Securities LLC and Merrill Lynch, sought to have the case dismissed on grounds that the market was extremely volatile in the ensuing months following the plaintiff's investment.

However, Hayes' stock broker fraud lawyer reported that FINRA found Merrill Lynch to be "solely liable" for the failure of the investment and subsequent loss. The stock fraud arbitration panel ordered the defendant to repay the plaintiff the full value of his initial investment, together with attorney fees, costs and filing fees. Interest on the initial investment was calculated from August 1, 2007—about a month after the investment was made—through January 9 of this year.

Hayes' stock broker investment fraud lawyer suggested that the investment was one of the most complex he had experienced. He also added that it is uncommon for an investor to get his entire investment returned, plus interest and costs.

Hayes, reached by the Gazette-Journal in Alabama after learning of the decision, described the particular investment into which his funds were placed as a risk akin to a lottery, and "I would've run from it," had he known.

He didn't know. It is therefore alleged that Merrill Lynch committed stockbroker fraud after its representative placed Hayes' money into a high-risk and complex investment that went against the stated wishes of the investor. Merrill Lynch, in a statement, said, "We disagree with the (FINRA) panel's decision, given the facts of this case."


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