Bobby Hayes, a Nevada retiree and wealthy investor, has been awarded $1.4 million in damages in securities arbitration against Merrill Lynch. According to Hayes’ allegations, Bank of America Corp.’s Merrill Lynch sold him collateralized debt obligations which were worthless at the time he purchased them.
The case was filed in 2011, and Hayes’ allegations included consumer fraud and breach of contract, among other misdeeds. The collateralized debt obligations, or CDOs, were purchased in 2008 from former Bank of America Securities LLC, which is now part of Merrill Lynch. The Financial Industry Regulatory Authority’s (FINRA) ruling, dated for January 31, 2012, was in favor of the claimant.
CDOs are securities that are backed by underlying pools of loans or bonds. While these investments are inherently risky, they are relatively common among qualified investors.” However, Hayes was unaware of the fact that at the time of purchase, the securities were already under water. The loans backing the securities were purchased by Merrill between November 2006 and June 2007. According to Hayes’ allegations, while in the company’s inventory, the securities lost a significant amount of their value. Regardless, Merrill sold the loans to investors like Hayes for the purchase price rather than what they were worth.
The FINRA panel awarded Hayes rescessionary damages; this allows for the return of the securities in exchange for the investor’s money per state securities laws. The rescessionary damages totaled $883,122. Hayes also received interest totaling $251,668, legal feels totaling $218,344 and costs totaling $23,500.
William Haldin, a Merrill Lynch spokesman, denied the securities’ worthlessness at the time of sale and stated that “Following the purchase of this investment, the market experienced extreme volatility.” Merrill Lynch disagrees with the FINRA panel’s decision.
If you believe you have been the victim of stock broker fraud connected with collateralized debt obligations, find out more about your legal rights and options by contacting an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.