New York Securities Lawyer Blog
This is the THIRD time where Lax & Neville LLP has won a significant FINRA arbitration award for the same purported sales practice abuses concerning the Merrill Lynch Phil Scott Team and the Merrill Lynch Phil Scott Team Income Portfolios and Blue Chip Portfolios. In the most recent arbitration, the Merrill Lynch Phil Scott Team recommended that Claimant invest 100% of his Merrill Lynch assets in the Merrill Lynch Phil Scott Team Income and Blue Chip Portfolios, which both consisted of 100% equities. This concentration of equities was patently unsuitable for the Claimant. During the arbitration process, Claimant focused on the Merrill Lynch Phil Scott Team’s blatant disregard of industry and regulatory obligations, and Claimant’s risk tolerances and investment objectives. Claimant also focused on Merrill Lynch’s lack of supervision of Phil Scott and his team members. In finding for the Claimant, the Arbitration Panel stated in the Award that it was “particularly concerned by the following actions of Respondents: (i) Misrepresentations and omissions were contained in the unrestricted marketing materials supplied by Respondents to Greg Porter, who in turn, having been cloaked with apparent authority by Respondents, presented the misleading materials to Claimant. This wrongdoing was caused by Respondent Merrill Lynch, Pierce, Fenner & Smith Incorporated’s inadequate supervision before the fact and aggravated by its failure to take corrective action after it received notice of the communications; (ii) Respondents’ manner of using the Personal Investment Advisory Questionnaire as a disclosure device was misleading and had the capacity to deceive. Respondent Merrill Lynch, Pierce, Fenner & Smith Incorporated’s continuing approval of this use constitutes inadequate supervision; and (iii) Respondent Merrill Lynch, Pierce, Fenner & Smith Incorporated’s failure to comply with its own ARMOR report procedures constitutes a breach of its duties toward Claimant and another example of inadequate supervision.” (See FINRA Arbitration Award). In the Award, the Arbitration Panel further stated, “[t]his list is not all-inclusive but is intended to give Respondents the benefit of some of the Panel’s conclusions so Respondents can modify their conduct accordingly.” (See FINRA Arbitration Award). The FINRA arbitration award against Merrill Lynch and Phil Scott consisted of $1,100,000 in compensatory damages, $540,144.00 in attorneys’ fees, along with costs in the amount of $74,341.00.