FINRA Arb Panel Slams BD Over Bad Investments for Elderly Client

The FINRA panel apparently ended up taking that into account. Although the panel found Andalman liable and ordered him to pay the claimant $42,500 in compensatory damages, it also found liability on the part of the claimant, who was ordered to pay Andalman $21,500 in compensatory damages, effectively reducing the compensatory damages Andalman must pay to $21,000.

The panel, however, also ordered Andalman to pay the claimant $1,100 in costs and $10,000 in expert witness costs, and also ordered PTI to pay the claimant $1,100 in costs and $10,000 in expert witness costs. The requests of Andalman and the firm for expungement of their FINRA Central Registration Depository records were denied by the panel.

Also assessed by the panel were $12,937 of hearing session fees to the claimant, $6,750 of those fees to Andalman and $6,187 of those fees to PTI.

The claimant had requested more than $836,000 in statutory damages and more than $239,00 in well-managed portfolio damages, in addition to $175,045 in "total out-of-pocket damages." Eccleston Law, the law firm representing the claimant, declined to comment.

"We are disappointed with the FINRA arbitration process and the results in this particular case," Aaron Schwartz, an associate attorney at Seiden Law Group, the Chicago law firm representing Andalman, told ThinkAdvisor Friday. "The evidence in this case and the ultimate award confirms that claimant in this case was ultimately responsible for the very claims he brought on behalf of his client, as power of attorney," he said, adding: "The trading activity was wholly consistent with the customer's explicit instructions and risk tolerance."

Schwartz also argued that it "should be concerning to the securities industry that arbitrators— who are unfamiliar with options trading—have unchecked power and ability to decide cases without explanatory opinions." Andalman "did everything in his power to make sure that the customer was apprised of the various risks of options trading and he remained in constant contact with the customer throughout the duration of the trading activity," he said, adding: "We believe it was a manifest disregard of the law for the arbitration panel to issue the award that it did, especially in light of the fact that the Panel found the claimant liable for the very conduct alleged."

— Check out FINRA Files Complaint Against Ex-Rep Who Didn't Testify Against BD on ThinkAdvisor.