Posted in: Greedy Brokers |
This week a FINRA panel of arbitrators penalized brokerage giant Morgan Keegan, Inc., awarding a former customer $1.45 million.
The customer was former NBA player Horace Grant, who had retired from basketball in 2004. Grant’s attorney said Grant wanted a stable “place to park his money,” as he had hoped to live off of a steady income from his investments. Instead his advisors at Morgan Keegan invested his money in RMK funds, which would eventually lose 90% of their value.
What really caught my attention from this story, however, was Morgan Keegan’s response to FINRA’s decision.
In an e-mail sent to investmentnews.com, Morgan Keegan spokeswoman Kathy Ridley said the following:
The panel did not provide any reasons for their finding in the Grant case and any explanation offered by the claimants attorney is just speculation. These cases turn on their individual facts and we don’t agree with the outcome here. To put this award in context, approximately half of the arbitration cases heard to date have been dismissed in their entirety and awards overall total approximately 28% of the damages claimed.
I understand that it is Ridley’s job to defend allegations against Morgan Keegan in the court of public opinion. She is a spokesperson for an embattled brokerage firm, so it’s fair to assume that this statement is just posturing on the part of Morgan Keegan.
But sadly, she may have a point.
Morgan Keegan holds more than $140 billion in assets, making them one of the largest regional broker firms in the United States. When a firm like Morgan Keegan doesn’t even flinch at a $1.45 million decision, it’s easy to understand why.
As it has been mentioned on this site, the firm has been the target of numerous lawsuits and customer complaints in the past year, due to their faulty RMK and related Bond Funds. Grant hired legal representation, diligently fought Morgan Keegan, and won—it’s fair to assume that many other customers won’t be as lucky. Only 45% of all FINRA arbitration cases from this year have resulted in any customer reward.
According to FINRA’s codes on arbitration proceedings, which is listed on the regulatory agency’s Web site, they consider a customer award to be anything over $1. So if you were a customer entering into a FINRA arbitration seeking millions of dollars, and you are instead awarded a tiny fraction of the damages, your case would still be lumped in with the 45%.
And as Ridley mentioned, FINRA have not made public the reasons behind their most-recent decision, which leaves open the possibility for an appeal. You can bet that Morgan Keegan will.
