Yesterday, a Financial Industry Regulatory Authority (FINRA) arbitration panel in New Jersey, FINRA Case No. 03-08177, handed down a decisive award in favor of a trader, who was also a Series 7 registered broker. The trader was sued by a retail investor relating to his recommendation of a municipal bond nearly fifteen years ago. The arbitration was first filed with the National Association of Securities Dealers in November of 2003, which predates the entity’s merger with the enforcement and arbitration arm of the New York Stock Exchange to form FINRA. The matter, which started in arbitration, winding its way in and out of the New Jersey courts, was the oldest and longest running case in FINRA’s history. As argued before the arbitration panel by the broker’s attorney, Jenice L. Malecki, “this case was nearly old enough to drive and only three years away from being allowed to vote.”
In addition to dismissing the investors’ claims in their entirety, the arbitration panel made the rare, and ultimately just, decision to award the trader $47,831.01 in attorneys’ fees based on the panel’s finding of “malicious prosecution” by the claimant investors. The panel further recommended expungement of the complaint from the broker’s registration records, as maintained by the Central Registration Depository (CRD), finding the investors’ allegations to be without merit and false. The case was in and out of arbitration and court numerous times over the years, contributing to its length.
According to the award, the Claimants in this case, in connection with their single purchase of municipal bonds, had alleged damages against the Respondent trader “in excess of $500,000.00 but not less than $1,000,000.000, the exact amount to be proven at the hearing.” However, as the panel determined, the investors had suffered no losses at all but in fact, received interest and turned a profit:
“In connection with his request for expungement, the Panel reviewed Respondent[‘s] brief and supporting exhibits and heard evidence regarding the purchase of the bonds, their performance during the period Claimants owned the bonds, and the ultimate result of their purchase. Specifically, Respondent  testified that Claimants bought the bonds at a discount to par and Claimants’ own documents corroborate that fact. Respondent  also testified that Claimants received interest on them and ultimately, the bonds were redeemed at par, giving Claimants a profit in the bonds. The redemption at par was also supported by documentary evidence.”
The panel thus recognized that this was a completely frivolous litigation brought by the investors, who were pro se and without counsel, but were nevertheless familiar with navigating FINRA’s arbitration forum and the judicial system. It came to light during this proceeding that the investors were apparently serial litigators with a long history of numerous other litigations they had initiated as plaintiffs. The trader, who has effectively been harassed over the last 15 years by the litigation ensuing from this arbitration, can now breathe a sigh of relief that this long nightmare is now over, we hope.