A Financial Industry Regulatory Authority panel says that Merrill Lynch (MER) has to pay Michele and Robert Billings $1.34 million for allegedly misrepresenting the risks involved in preferred shares of Fannie Mae. The couple, who used to own a pest control business, placed $2.3 million in the shares in 2008 on the recommendation of their broker, Miles Pure.
The Billings claim that Pure told them them that their investment was “safe,” backed by the government, and came with an attractive yield, when, actually, contends the couple, at the time Fannie Mae’s exposure to the residential real estate market that was failing was causing Fannie Mae to lose billions of dollars. Even as the stock’s price went down, they say that Pure discouraged them from selling. They also claim that he didn’t let them know that the financial firm’s own research showed that Fannie Mae was becoming more beleaguered. Not long after, the Billings’ shares lost their value when Fannie Mae went into government conservatorship.
They filed their FINRA arbitration claim contending civil fraud, negligent supervision, and other alleged wrongdoing. The couple, who are now retired, sought $1 million from Merrill Lynch, in addition to other relief. The $1.34 million award includes punitive damages.
While a spokesman for Merrill says that the brokerage firm doesn’t agree with the panel’s ruling, the Billings’ securities attorney expressed approval of the outcome. Meantime, the FINRA panel has denied Pure’s request to have the disclosure about this arbitration taken out of public record. Although he was not involved in this case, per the securities industry, all securities brokers who are license must have their connection to any arbitration claim noted in their public records regardless of whether/not if he/she was party to it. (The panel, however, did remove the arbitration disclosure from the record of a brokerage manager who didn’t deal directly/daily with the Billings.)
Pure is now a Morgan Keegan broker. Morgan Keegan is a Raymond James Financial Inc. (RJF) unit. Merrill Lynch is a Bank of America (BAC) subsidiary.
This securities case is an example of some of the repercussions that are still happening for investors and brokers in the wake of the economic crisis. The Billings are just two of many investors that have sustained financial losses because a brokerage firm allegedly misrepresented the risks involved in an investment. Meantime, more arbitration claims over such losses are still pending.
Merrill Lynch ordered to pay couple $1.34 million over Fannie Mae Preferred Shares, Reuters/Chicago Tribune, October 16, 2012
Bank of America Merrill Lynch hit with $1.3 million arbitration order, Investment News, October 17, 2012
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