FINRA ORDERS UNITS OF MERRIL LYNCH TO PAY $8.1 MILLION

by Christopher J. Gray on August 10, 2011

in FINRA,FINRA Arbitration,Merrill Lynch

Recent Financial Industry Regulatory Authority (FINRA) securities arbitration resulted in the order for units of Merrill Lynch to pay compensatory damages to Staton Family Investments Inc. totaling $8.1 million for breach of fiduciary duty. Staton Family Investments and Daniel Staton accused Merrill Lynch of securities fraud, negligence, breach of contract and common stock theft. According to the claimants, 1,260,000 shares of Duke Realty Corp. common stock were stolen from their accounts.

Finra Orders Units of Merril Lynch to Pay $8.1 Million

Daniel Staton was found to not be personally affected, so he was dismissed as a claimant. When the claim was filed in December 2008, claimants requested more than $1 billion in restitution: $900 million in treble damages or 1,260,000 shares of the aforementioned stock, $300 million in compensatory damages, $50 million for punitive damages and other costs including attorneys’ fees.

The alleged wrongdoing occurred, according to the claimants' lawyer, when Merrill Lynch failed to make Staton Family Investments adequately aware of the terms of certain trigger prices that could possibly reduce the value of Duke Realty’s stock to nothing. Around the time the stock dipped below the trigger price, another $4 million was requested from the family company by Merrill Lynch, while still not notifying them of how undercollateralized the loan was. Though Merrill Lynch only requested $4 million, the money they actually owed amounted to $23 million.

FINRA denied claims against individual respondents but also denied the individuals’ requests to have the arbitration proceedings removed from their CRD records. According to Bill Halldin, a Bank of America spokesman, Merrill Lynch did nothing wrong and he stated, “We are considering additional action in this matter, including asking a court to overturn this decision.”

The FINRA panel’s split decision came through on July 21, and satisfied neither the substantial sum requested by the claimants nor the respondents’ firm denial of wrongdoing.

Previous post:

Next post: