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FINRA Arbitration Panel Ordered Merrill Lynch to Pay Investors $1.3M for its Misrepresentations Regarding the Recommendation to Purchase Fannie Mae Preferred Shares

A Financial Industry Regulatory Authority (“FINRA”) arbitration panel recently rendered an award ordering Merrill Lynch Pierce, Fenner & Smith Inc. (“Merrill Lynch”) to pay $1.3 million to Claimants Robert and Michele Billings (“Billings”) who claimed that the brokerage firm misrepresented the risks associated with the purchase of Fannie Mae preferred shares. According to the statement of claim filed with FINRA in May 2011, based upon their broker, Miles Pure’s, recommendation that the shares were “safe,” had an attractive yield and were back by the U.S. Government, the Billings invested approximately $2.3 million in Fannie Mae preferred shares. Forty-one (41) days after Mr. Pure made these recommendations to the Billings, the Federal Housing Finance Agency placed Fannie Mae in conservatorship. Further, Merrill Lynch’s own analyst team had downgraded the Fannie Mae common stock to “sell” five months earlier. The Billings’ entire investment was rendered “virtually worthless.” The Billings asserted the following causes of action: (1) breach of fiduciary duty; (2) negligence; (3) negligent supervision; (4) fraud; and (5) breach of contract. The Billings sought compensatory damages in excess of $1,000,000, as well as punitive damages and other relative costs. The arbitration panel ultimately found Merrill Lynch liable for breach of fiduciary duty and, although it denied the Billings’ request for punitive damages, it ordered Merrill Lynch to pay a total of $1.3 in compensatory damages. The arbitration panel denied Merrill Lynch’s request to expunge the Billings’ allegations from Mr. Pure’s publicly available broker record. See Broker CRD here. The full text of the arbitration panel’s award can be viewed here. If you have suffered losses from investments with Merrill Lynch or any other investment adviser firm or brokerage firm, and believe that you are a victim of sales practice abuses, please contact Lax & Neville LLP for a consultation at (212) 696-1999. Our firm has extensive experience and knowledge representing victims of investment fraud nationwide.

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