In a case preceding the credit crisis, a Financial Industry Regulatory Authority panel has awarded Michael Farah, an ex-star broker at Wedbush Securities Inc, a $4.2M arbitration award against the brokerage firm. Farah had accused the broker-dealer of making misrepresentations and omissions related to the collateralized-mortgage-obligation investments he recommended to clients, which he contends resulted in him losing not just customers but also yearly income.
He was the firm’s leading producer for a long time, working there from 1995 to 2005. Farah filed his securities claim against Wedbush, formerly known as Wedbush Morgan Securities Inc., in 2005 and then submitted an amended case last year.
Farah sold millions of dollars in CMOs. He claimed that he was told that the securities were bond replacements. However, he contends that the plunging of CMOs price in early 2003 was not in linr with what the bond desk had informed him about the securities’ volatility.
The FINRA panel’s award includes $1.3 million to Farah for income loss, $1.4 million in punitive damages, and $1.5 million for legal and arbitration proceeding costs. (Punitive damages are not typical in FINRA arbitration awards—especially when an ex-broker and a firm are involved.)
This is the second significant arbitration award to an ex-Wedbush securities employee in the last couple of years. A FINRA arbitration panel awarded a former Wedbush municipal sales trader Stephen Kelleher $3.5 million because the firm did not give him a certain number of years’ worth of incentive-based compensation. The panel said that the broker-dealer exhibited a “morally reprehensible failure and refusal” to give the owed compensation. Other current and ex-Wedbush employees also have brought legal actions over compensation problems.
Former star Wedbush Securities broker wins $4.2 million award against firm, InvestmentNews, September 26, 2013
Wedbush Inc. is ordered to pay former trader $3.5 million, Los Angeles Times, June 29, 2011
More Blog Posts:
Many Financial Fraud Victims Don’t See It Coming, Says Survey, Stockbroker Fraud Blog, September 7, 2013
FINRA Enhances Its Arbitrator Vetting Policy, Stockbroker Fraud Blog, August 26, 2013
FINRA Fines Expected to Drop 41% in 2013, Institutional Investor Securities Blog, September 4, 2013