A panel of FINRA arbitrators recently awarded $1.4 million to Agatha and John Dancy, two elderly former clients of Wedbush Securities who were sold allegedly unsuitable structured and derivative products by their broker, Mark Augusta. While a significant award in its own right, the award is particularly notable because it includes a whopping $1.1 million in punitive damages–roughly three times the amount of compensatory damages the Claimants sought and the panel awarded.
California’s elder abuse laws, which provide for recovery of “treble damages” in cases involving elder abuse, likely factored in the panel’s decision to wack Wedbush with over a million in punitives. While the arbitration award is final, and there is no mechanism to appeal it through FINRA’s arbitration division, Wedbush and its attorneys are likely evaluating potential grounds to challenge the award in court through a petition to modify or vacate the award.
Augusta’s public broker-check report reflects more than 15 client complaints in his 30 year career in the industry. He resigned from Wedbush immediately after the investors filed a complaint claiming the structured and derivative products he allegedly sold them were unsuitable and inappropriate given their advanced age. Augusta remains employed in the securities industry, and is currently registered with Hilltop Securities in Del Mar, California.
Shustak Reynolds & Partners, P.C.’s experienced California securities and financial services lawyers are well versed in the securities and financial services industry. We routinely represent brokerage firms, registered representatives, registered investment advisory firms (RIAs) and others employed in the securities and financial services industry in FINRA inquiries and investigations. Contact our San Diego FINRA lawyers today for a complimentary consultation.
The Financial Industry Regulatory Industry (FINRA) is a non-profit, non-governmental organization authorized by Congress to regulate the brokerage industry. Through its more than 3,500 employees, FINRA’s stated goal is to protect investors and the integrity of the financial markets through writing and enforcing rules governing broker-dealers and their registered representatives (e.g., stock brokers); examining brokerage firms and brokers for compliance issues and other rule violations; and, in the case of an actual or potential rule violation, administering enforcement actions and discipline through its enforcement division. FINRA is funded from a variety of sources, including annual “member” fees brokerage firms must pay. In addition, FINRA often assesses significant monetary fines on broker-dealers and registered representatives who have run afoul of FINRA’s rules.
Each year, FINRA publishes a financial report detailing the regulator’s revenues and expenses for the past year. For the 2016 calendar year, FINRA recently reported a significant increase in the total dollar amount of fines assessed against brokerage firms and brokers. The number of firm examinations and enforcement actions, meanwhile, was only slightly increased as compared to prior years. In 2016, however, FINRA collected $80 million more in fines than in 2015, reflecting a nearly 60% increase in the total dollar value of fines assessed.
The large increase in fines comes at a time when FINRA’s overall operating revenues have continued to decline. With fines on the rise, and FINRA’s expectation that its operating revenues will continue a slow decline, that could spell trouble for brokerage firms and registered representatives facing a FINRA rule violation or enforcement proceeding. FINRA also signaled that its annual membership dues, which have not increased for the past five years, may soon be rising as well.
Shustak Reynolds & Partners, P.C.’s experienced California securities and financial services lawyers are well versed in the securities and financial services industry. We routinely represent brokerage firms, registered representatives, registered investment advisory firms (RIAs) and others employed in the securities and financial services industry in FINRA inquiries and investigations. Contact our San Diego FINRA lawyers today for a complimentary consultation.
