ALBANY, NEW YORK FINRA ARBITRATION PANEL ISSUES $39.8 MILLION AWARD IN FAVOR OF INSTITUTIONAL INVESTOR

Merrill Lynch & Co. must pay an investor $39.8 million in compensatory damages because of negligence on the part of one a subsidiary broker-dealer, an Albany, New York FINRA arbitration panel has ruled. The FINRA panel issued the award to Trustees of the Masonic Hall & Asylum Fund, which is an endowment for an Utica health-care facility. The award is significant because it represents one of the largest arbitration awards in favor of an investor issued by FINRA or its predecessors, the National Association of Securities Dealers and New York Stock Exchange Regulation.

The fund’s arbitration claim had accused Merrill Lynch and subsidiary Advest Inc. of misrepresentation, negligence, breach of fiduciary duty, and breach of contract. The claim had also accused Advest Inc. of encouraging it to buy into Sphinx Managed Futures Index Fund LP, which was owned by Refco Inc. However, Refco Inc. collapsed in 2005 after giving notice that its chief executive had concealed bad debts valued at about $430 million from firm auditors. The fund alleged that it lost money because of Advest Inc.’s poor recommendation.

The FINRA panel awarded the fund $30.6 million plus $9.2 in interest from as far back as November 2005. The full award can be accessed below.

09.3.18 masonic hall award.pdf (144.64 kb)