The Financial Industry Regulatory Authority Inc. has slapped a defunct New York brokerage firm with a $5 million fine related to excessive account trading — churning — in what was supposed to be a conservative investment strategy.
The challenge now will be collecting on the award, according to Adam Gana, the lawyer representing the retired dairy farmers who saw a $1.5 million portfolio incur $1.3 million in trading costs in a single year.
Windsor Street Capital,
previously operating as Meyers Associates in midtown Manhattan, was
expelled by Finra in May, which dampens the likely resolution of what is one of the 10 largest Finra awards this year.
"It's a hollow victory because the award is probably not worth the paper it's printed on," said Andrew Stoltmann, president of the Public Investors Arbitration Bar Association.
"It's a big dollar award, and a head-turner," he said. "But it must be frustrating, because people go through Wall Street's court, they win and then they can't collect. It's the ultimate punch in the gut and Finra is doing little to stop it."
Finra did not respond to a request for comment on what it is doing to help victims collect awards, but did email a white paper entitled,
"Finra Perspectives on Customer Recovery."
In May, Sen. Elizabeth Warren, D-Mass., and Sen. John Kennedy, R-La., co-sponsored legislation to
establish a fund financed by Finra fine money to cover awards firms and brokers fail to pay.
In the meantime, Mr. Gana, partner at law firm Gana Weinstein, plans to file a civil suit against Windsor Street Capital.
"We will be very aggressive in attempting to collect," he said. "We will be pursing them to the end of the earth to get that money."
According to the original complaint and Finra's award, in late 2015
former Windsor broker Jovannie Aquino cold-called the victims, Patrick and Mary Shea, who had up to that point been managing their own investments on a discount brokerage platform.
Of the three separate accounts Mr. Aquino managed for the Sheas, one had a 37.9% portfolio turnover rate between December 2015 and December 2016.
The trading costs contributed to driving down the value of the Sheas' portfolio by more than 36% in 2016, a year in which the S&P 500 Index gained 12%.
