Oppenheimer Loses $1.1M FINRA Arbitration in Denver, Colorado

On August 26, 2011, a Financial Industry Regulatory Authority (FINRA) arbitration panel in Denver, Colorado ordered brokerage firm Oppenheimer & Company to pay the co-founder of Boston Market Corporation more than $1 million. The investor had filed claims against Oppenheimer for breach of fiduciary duty, stockbroker negligence, negligent supervision, excessive trading (churning), and the violation of state and federal securities acts. Churning is one of the more egregious forms ofstockbroker misconduct because it involves a conscious decision by the broker to make trades for the primary purpose of generating commissions, regardless of whether the trades make sense for the investor.

Although the arbitrators' award to the investor was large, it was much less than the claim for damages of more than $4 million. In all likelihood, the arbitrators attributed some comparative fault to the investor, who was a successful businessman. While success in business does not equate to investment sophistication, brokerage firms routinely claim as a defense that successful business people are a sophisticated and were fully aware of how their account was being handled. The arbitrators' award does not explain why the damage award was less than the amount of requested damages.

Following a three-day evidentiary hearing, the FINRA arbitration panel concluded that Oppenheimer was liable to the investor and ordered Oppenheimer them to pay $1,112,500 in compensatory damages, plus post judgment interest at the annual rate of 9%.

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