Why This FINRA Arbitration Ruling Against A Clearing Firm Is Important For Investors

A FINRA arbitration panel ordered Axos Clearing to pay up to $49.2 million to over 100 former customers of the defunct brokerage Worden Capital Management for allegedly ignoring red flags and enabling broker misconduct. This ruling is highly significant for investors because it establishes that clearing firms can be held financially liable for disregarding fraud, providing a potential avenue for financial recovery even after a broker-dealer shuts down.

A Financial Industry Regulatory Authority (FINRA) arbitration panel ordered Axos Clearing, LLC to pay up to $49.2M to over 100 investors because of its role as the clearing firm of Worden Capital Management, which is no longer in operation. FINRA expelled the broker-dealer in 2022 following  the misappropriation allegations.

Worden Capital paid Axos millions of dollars in clearing fees and commissions. The brokerage firm earned more than $16M commissions even as investors lost over $12M. Allegations made by former customers. of Worden include churning, unsuitable trading, breach of fiduciary duty, unsuitability, negligence, breach of contract, and more.

Why Is the FINRA Arbitration Panel Holding Axos Liable For The Alleged Broker Fraud by Worden Capital?

• As the clearing firm for Worden, Axos’s role was to handle payments, process stock transactions, and more. It served as an intermediary between retail investors and the firm
• Investors have been accusing Axos of  choosing to “turn a blind eye” while Worden used investors’ funds as personal slush money to engage in misappropriation. The Claimants contend that the clearing firm should have noticed that the brokerage firm was committing broker misconduct.
• Their FINRA lawsuit named Worden Capital and owner Jamie Worden as third-party respondents.

What Is Clearing Firm Liability?

While clearing firms are not necessarily liable for all misconduct or negligence by a brokerage firm, if they disregarded warning signs, including those involving possible churning, suspect account activity, and more, that broker-dealer’s customers may be able to sue the clearing firm for damages. They can also be taken to account if they did anything to enable the broker misconduct or fraud from occurring.

Why Is The FINRA Arbitration Award Against Axos Clearing Important To Investors?

• When a brokerage firm shuts down, it can be challenging for customers who have suffered losses due to financial advisor fraud, misconduct, or negligence, to get their money back from the firm.
• By holding Axos liable for allegedly ignoring warning signs that Worden Capital might have been engaged in any wrongdoing, not only could this give investors in similar situations with a defunct broker-dealer another avenue for financial recovery, but also, it sends a clear signal to clearing firms that cannot disregard red flag indicating possible broker fraud or they could be held liable.

Are You A Worden Capital Customer Who Suffered Serious Losses While Working With The Firm?

Shepherd Smith Edwards and Kantas (investorlawyers.com) wants to talk to you and help you explore your legal options. Just because the broker-dealer is no longer in operation does not mean you’ve lost your path to financial recovery.  We are a seasoned securities law firm that knows how to determine whether you have grounds for an investor lawsuit and against which parties.

Investment loss recovery cases can be complex and you want to hire knowledgeable investor lawyers that know how to fight for your financial recovery and protect your legal rights.

Call (800) 259-9010 or contact us online to schedule your free case consultation.