FINRA New York Panel Awards Customer $206,000 Against Gilford Securities, Broker

On July 11, 2017, a FINRA arbitration panel awarded customer Denise Hoffman $206,783 plus interest on the claim she had filed in November 2012. The claim named as respondents Gilford, Ralph Worthington IV and Gary Zwetchkenbaum

The claim alleged breach of fiduciary duty, negligence and negligent supervision relating to various securities. The claim alleged $800,000 in damages (a later filed amended claim asked for $900,000 in damages).

Worthington settled with the claimant prior to the hearing.

The panel made a joint and several award against Gilford and Zwetchkenbaum.

The timeline for this arbitration was very unusual. The claim was filed in late 2012. Gilford filed an answer in early 2013. The claimant filed an amended claim in 2016; Worthington and Zwetchkenbaum filed answers thereafter. They presumably were not named in the original claim. But there is no explanation for the delay between the filing of the original claim and the amended claim.

Ladenberg Thalmann & Co. acquired Gilford Securities in 2016.

Worthington’s BrokerCheck report indicates he worked in the securities industry for 44 years and lists 10 disclosures. Zwetchkenbaum has worked in the industry for 20 years and has 11 disclosures.

Investors routinely allege negligence in FINRA arbitrations, but what exactly do they have to prove to win on that claim? Negligence can be defined as the failure of a brokerage firm or a financial advisor to act in a reasonable and prudent manner when making recommendations to a client or prospective investor. This covers a wide array of behavior from failure to convey risks associated with an investment to omission on the part of the broker to urge action on the part of the client. For instance, this could include the broker’s failure to recommend that the client sell his position if the security is declining in value.

Broker dealers generally assert the defense that claimants ratified their investment decision by not directing the sale of assets and that it is the obligation of the client, not the broker, to direct the sale of assets.

In assessing negligence, an arbitration panel will examine the totality of the circumstances and generally look at the following factors:

  1. Sophistication and net worth of investor
  2. Whether the account was discretionary or non-discretionary
  3. Clients’ degree of control or involvement in the account. This is generally determined by average number of calls to broker, whether client has online access to account and whether client was monitoring account statements

In any FINRA arbitration, attorneys for both sides will seek discovery in the form of monthly statements and new account documents from any other broker dealers used by the claimants. Discovery will show what the claimants’ investment objectives were and how claimants traded with other brokerage firms.

If a claimant asserts negligence or unsuitability, attorneys for the broker dealer will seek to use outside investments to show pattern of high yielding riskier investments. This will bolster the broker dealer’s arguments that the clients were experienced and that they ratified the investments at issue

If you have questions or concerns regarding the handling of your brokerage account, or whether your financial advisor may have deviated from FINRA suitability rules you should consult the securities arbitration attorneys at Lubiner, Schmidt & Palumbo.