A FINRA arbitration panel has ordered New York-based Goldman Sachs & Co. to pay approximately$2.5 million to an investor who alleged the brokerage firm recommended an unsuitable investment, the Goldman Sachs Special Opportunities Fund. The arbitrators found that the documentation for the Special Opportunities Fund was defective and that Goldman Sachs had failed to supervise the transaction properly. This case is typical of many recent investment fraud cases, where the investment product itself was faulty or flawed, rather than one in which a specific stockbroker personally acted with intent to harm the investor. Such product cases give rise to claims that could be brought by every investor who bought the flawed product.
The arbitrators ordered Goldman Sachs to pay $1.6 million in compensatory damages and nearly $1 million in interest and expert fees. As typically is the case with FINRA arbitration awards, the arbitrators in this case did not provide an explanation regarding how the Goldman Sachs Special Opportunities Fund offering documents were defective.
Notably, one of the three arbitrators disagreed with the decision. Fortunately for the investor, a FINRA arbitration cases are decided by majority, rather unanimous, votes of the three arbitrators.
As a general matter, FINRA arbitration awards are binding on the parties because there are very limited circumstances under which a losing party can overturn or vacate an arbitration award.