A stock broker arbitration hearing conducted by the Financial Industry Regulatory Authority (FINRA) awarded plaintiff Lloyd Gillespie $1.2 million in damages and other costs, according to Reuters (1/18/13). The panel’s award to the investor includes $848,000 in damages, $174,000 in legal fees, plus interest and costs, according to the ruling.
Stock brokers and investment advisers are required to manage a stock portfolio and conduct investments and trades based on an investor’s stated risk tolerances and investment goals. However, in his stock broker arbitration case, the Nacogdoches, Texas investor alleged that adherence to his tolerances and goals was sadly lacking.
According to the report, brokers representing Oppenheimer as well as two other firms concentrated Gillespie’s portfolio in highly speculative stocks, using margin to purchase securities.
Commissions for those trades amounted to about $550,000 with Gillespie’s losses totaling about $1 million.
When Gillespie became aware of the situation, he contacted a stock broker fraud lawyer. Claims against two other unidentified firms in the case were settled. Oppenheimer was identified as being responsible for most of the excessive trading and hit with the $1.2 million judgment in the stockbroker fraud case.
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When Gillespie originally filed his stock fraud arbitration case in 2009, he sought $4 million in damages. He alleged that not only did the brokers err in trading beyond his risk tolerances - earning substantial commissions in the process - Oppenheimer should have done a better job of supervising their brokers. McCann told Reuters that an ideal threshold for trading cost is three to four percent, although some experts have stated the threshold can go as high as ten percent and still be thought of as acceptable.
In Gillespie’s stock broker investment fraud case, the trading costs ballooned to 20 percent. Over a half-million dollars in commissions were earned by the stock brokers involved, in a time frame encompassing 2.5 years.