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Doug Mirabelli, a former catcher for the Boston Red Sox, was awarded more than $1.2 million in arbitration against brokerage firm Merrill Lynch after claiming that the firm sank his money in inappropriate investments and made unsuitable recommendations, according to a Jan. 23 report by Reuters.
On Jan. 13, an arbitration panel of the Financial Industry Regulatory Authority (FINRA) ruled that Merrill Lynch had to repay Mirabelli and his wife Kristin more than $1.2 million in damages and fees.
The arbitration with the Mirabellis stemmed from activity before Merrill Lynch's merger with Bank of America in 2009, according to the Reuters report.
The Mirabellis invested about $1.8 million with Phil Scott, one of Merrill Lynch's top advisers who has worked with the firm for almost 30 years. Based in Washington state, Scott managed about $1.1 billion in client assets last year, according to Barron’s.
In early 2008, Scott placed the Mirabellis’ assets into his team’s income portfolio, made up of 33 dividend-paying growth stocks, the Reuters report said.
The account was collateralized through loans such that if its value fell below $1 million, the securities would have to be sold. Sure enough, the value plunged in November 2008 when the financial markets went haywire. The securities were sold and the Mirabellis lost about $800,000 as a result.
Lawyers for the Mirabellis argued that Scott’s recommendation to invest in an all-growth stock portfolio were unsuitable.
A Merrill Lynch spokesman said the firm disagreed with the panel's decision. The Reuters report quoted the spokesman as saying the account was handled properly during a difficult time of extreme market volatility.
Barry Lax, a lawyer for the Mirabellis, said the arbitration panel put his clients back in the position that they would have been in if they had never met the Merrill Lynch adviser, according to the Reuters report.
Lax said it was rare for a FINRA arbitration panel to award the entire amount of a loss. He estimated that that less than 5 percent of the cases he has handled over the past 20 years have ended with full repayment.
The ruling in the case was captioned: In the matter of the Arbitration between Douglas Mirabelli and Merrill Lynch, No. 10-03400.
Arbitration is a method of alternative dispute resolution, and many dust ups between customers and their advisors, brokers or broker-dealer firms may land in front of a FINRA arbitration panel. Such panels are usually composed of three impartial arbitrators who have some expertise in securities industry disputes, according to the FINRA website.
As a relatively quick and inexpensive means of resolving complicated issues, arbitration is an increasingly common alternative to litigation in the courts. Parties should be aware that arbitration awards are final and binding, and can only be reviewed by a court on an extremely limited basis.
All securities arbitrations are governed by the Uniform Code of Arbitration as developed by the Securities Industry Conference on Arbitration. The rules of the sponsoring organization where the claim is filed -- such as FINRA – also apply.
In addition to filing for a FINRA arbitration, investors may file complaints with other regulatory authorities, such as the Securities and Exchange Commission or the North American Securities Administrators Association.
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Firm, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.
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