Case Type: FINRA Arbitration Claim
Organization: Madison Avenue Securities
Sanford Heisler Sharp, LLP has filed an arbitration claim with the Financial Industry Regulatory Authority (FINRA) against Madison Avenue Securities alleging the firm turned a blind eye in allowing one of its stockbrokers who had a disciplinary history of misappropriating clients’ funds to loot hundreds of thousands of dollars from client’s account.
The claim alleges that the stockbroker persuaded a long-time client to send him funds that he said he would use to buy bank CDs. Rather than buying the CDs, the broker took the money. Then when the client asked for the money back from the bank, the stockbroker borrowed money from the client’s brokerage account and sent it to the client claiming it was the CD proceeds. After about a year, the trusting client finally caught on to the scam. Madison Avenue never detected the fraud.
The claim also alleges the stockbroker invested the client’s account imprudently in volatile energy stocks and risky derivative securities. Madison Avenue did nothing to correct the mismanagement. The stockbroker’s misconduct had a devastating effect on the client. An account that began with $1.6 million in March 2015 was worth $1,500 in the end.
Madison Avenue knew the stockbroker had been fired from a prior firm and fined and suspended by FINRA for misusing client funds. Instead of placing the stockbroker under heightened supervision, Madison Avenue designated him as the person-in charge of a remote branch office and took a “hear-no evil, see-no evil” approach to supervision. We believe if Madison Avenue had reasonable policies and procedures concerning the review of the customer’s accounts, as well as deposits and wire transfers to its registered representatives, Madison Avenue could have detected and prevented the harm.
This is not the first time that Madison Avenue and the stockbroker have been the subject of these types of claims. In January 2018, Sanford Heisler Sharp obtained $2,157,242.75 in compensatory damages, punitive damages and attorneys’ fees against Madison Avenue Securities and the stockbroker for breach of fiduciary duty, fraud, and negligent supervision. Donna Gambee v. David Lloyd Barber, Madison Avenue Securities, LLC, Case Number 16-01450 (January 5, 2018)