Bank of America (NYSE:BAC)
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3 Years : From May 2012 to May 2015
By Caitlin Nish
NEW YORK--An arbitration panel has ruled that Merrill Lynch and one of its brokers must pay a Washington state-based investor roughly $1.7 million for misrepresenting his investments.
The investor, Clair R. Couturier Jr., accused the firm and his broker of breach of fiduciary duty and making inappropriate recommendations, among other claims, according to documents from the Financial Industry Regulatory Authority arbitration panel in Seattle.
The broker, Phil Scott, recommended 100% equity portfolios as a "safe and moderate" investment, said Barry Lax, one of the lawyers who represented Mr. Couturier. But when the financial crisis hit, the stock market declined and Mr. Couturier lost $2.5 million, Mr. Lax added.
In an unusually detailed decision, the three-person arbitration panel said "misrepresentations and omissions" were contained in the unrestricted marketing materials supplied by Merrill and Mr. Scott. This "wrongdoing" was caused by Merrill's "inadequate supervision before the fact and aggravated by its failure to take corrective action after it received notice of the communications," the panel wrote.
The panel also chastised Merrill and Mr. Scott for using a "Personal Investment Advisory Questionnaire" as a disclosure device, saying it was misleading. Merrill's continuing approval of this use constitutes inadequate supervision, it added. The panel further found that Merrill's failure to comply with its own supervisory procedures constitutes a breach of its duties to Mr. Couturier and "another example of inadequate supervision."
The panel said the findings included in its decision aren't all-inclusive, but were provided so that the firm can modify its conduct.
"We disagree with the panel's decision given the facts presented in this case," said Merrill spokesman Bill Halldin. "This account was handled properly during a very difficult time when there was extreme market volatility."
In his statement of claim, originally filed in early 2011, Mr. Couturier asked for $2.5 million in compensatory damages as well as attorneys' fees and other costs. The panel, in its decision dated Tuesday, ordered Merrill and Mr. Scott to pay $1.1 million in damages, about $540,000 in attorneys' fees and roughly $74,000 in costs.
Mr. Lax said he and his client are pleased with the decision, which "shows that yet another neutral arbitration panel found there to be systemic sales practice abuses by the Phil Scott Group."
In January, a Detroit-based panel ordered Merrill to pay roughly $1.2 million to former Boston Red Sox catcher Douglas Mirabelli and his wife for Mr. Scott's allegedly inappropriate investment advice.
Merrill Lynch is the retail-brokerage unit of Bank of America Corp. (BAC).
Write to Caitlin Nish at email@example.com
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