A panel of arbitrators has issued a $14.3 million award in favor of two investors in their claim against Stifel Financial Corp., AdvisorHub reports.
The plaintiffs, Louis and Elizabeth Deluca and their business, UBS Inc., filed suit last year, claiming up to $5 million in damages. The Delucas alleged fraud, negligence, negligent supervision and other claims in their complaint relating to their investments in structured notes.
They alleged that Stifel Financial failed to supervise the structured note strategy of Miami -based broker Chuck Roberts, who recommended investments that resulted in losses.
The complaint against Stifel alleged that Roberts recommended auto-callable contingent structured notes that offered minimal downside protection against sharp declines in the price of underlying reference assets. The plaintiffs sought damages based on multiple grounds, including breach of fiduciary duty, negligence, negligent supervision, fraud, breach of contract, and violations of the Florida Securities and Investor Protection Act.
The Delucas had sought compensatory damages for losses tied to the structured notes. They claimed Roberts misled them about the risks and potential returns of the notes, which regulators have warned are “very complex and have significant investment risks.”
The Financial Industry Regulatory Authority’s three public arbitrators decided on an award that includes almost $4.1 million in compensatory damages split between the couple and their business. The panel also ordered that Stifel pay them $9 million in punitive damages, $1.1 million in attorney fees and almost $146,000 in costs.
The arbitrators denied Stifel’s request to expunge the matter from Roberts’ public record. He was not named as a party in the case but participated as an “unnamed individual,” according to the award.
“I think the magnitude of punitive damages in this case is commensurate with the evidence of wrongdoing,” said one of the claimants’ lawyers, Stefan Apotheker of Erez Law, who said the firm is representing investors in more than a dozen other cases.
A Stifel spokesperson said the firm disagrees with the decision and will attempt to have it overturned in court.
“While we respect the FINRA arbitration process, we strongly disagree with this panel’s decision and the way it conducted the hearing,” the spokesperson wrote in a statement. “This windfall award vastly exceeds any actual damages incurred by an extremely sophisticated client and is simply not supported by the facts of the case.”
The arbitrators did not provide an explanation for their award, as is customary unless both sides requested a reasoned decision.
The attorneys at Lewitas Hyman have handled hundreds of arbitrations before FINRA, the Chicago Board Options Exchange, the Chicago Board of Trade, JAMS, the American Arbitration Association and other self-regulatory organizations nationwide. We have also appeared in courts throughout the United States in various securities-related matters. For more information about our arbitration and litigation services, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.
