Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with brokers who have sold highly unsuitable investments to their clients. Brokers have a legal obligation to sell investments that are suitable for their clients’ age, risk tolerance, financial sophistication, and mental capacity. Sometimes, though, they ignore all of these safeguards to take advantage of older customers to generate what they think are easy commissions.
The worst cases that we’ve represented usually involve wealthy elderly clients whose portfolios are pilfered and re-invested in risky vehicles that lose large amounts of money, often leaving them impoverished. These practices are commonly known in the industry as “selling away,” or diverting assets away from investments brokerages normally deem inappropriate for older clients.
Eduardo Tarajano, Sr., 80, is suing his broker Jorge Sonville for investing more than $4 million in a Key Biscayne, Florida, liquor store, which was later sold for $585,000. Sonville, working for Merrill Lynch, had allegedly drained Tarajano’s family trust to buy a stake in the store. Tarajano’s federal suit alleges that Sonville worked with Tarajano’s son and the broker’s cousin to “pilfer the accounts Merrill Lynch was managing.” The cousin reportedly received a commission for the liquor store transaction.
Brokerage firms have a legal duty under FINRA rules, which govern securities brokers, to supervise what their brokers are selling and whether the investments are suitable for their age and risk tolerance. The Tarajano suit accuses Merrill of “negligence in failing to monitor suitability and know-your-customer rules, breach of fiduciary duty, and breach of contract in addition to the supervisory failure.”
“[H]ad sufficient supervisory rules and procedures been in place, the ‘selling away’ of Plaintiffs’ entire holdings to fund a failing liquor store would have been prevented,” the suit stated. The funds invested in the liquor store were reportedly diverted from Tarajano’s wife’s retirement savings. She is suffering from Alzheimer’s Disease.
Although Sonville, a Merrill broker for 25 years, was not named in the current complaint, a disclosure on his FINRA Brokercheck disclosure shows that he was involved in a customer dispute in 1998. The complaint alleged that Sonville failed to sell an entire position of a bond fund, claiming damages of more than $10,000. The dispute was resolved in a settlement payment of $6,000 to the client.
Some $3 billion a year is stolen from elderly clients every year from shady financial service professionals, according to the U.S. Department of Justice. Regulators have a raft of rules in place designed to protect seniors from financial exploitation.
Have you invested with brokers who have sold you inappropriate investments that ignore your risk tolerance? FINRA and the SEC have strict rules on disclosing risk profiles on all investments sold by brokers and investment advisers. If they fail to fully inform you of downside risk, you may have a case in arbitration. You may also be able to file a lawsuit. If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!