Oppenheimer Ordered to Pay Investor $1.2 Million in Case
By Caitlin Nish | January 18, 2013
NEW YORK–An arbitration panel has ordered Oppenheimer & Co. to pay nearly $1.2 million to a Texas investor who accused two of the firm’s brokers of excessive trading in his account to generate hefty commissions.
The investor, Lloyd A. Gillespie, claimed the brokers inappropriately concentrated his account in highly speculative stocks, including penny stocks, and occasionally used margin to buy them, according to the ruling from the Financial Industry Regulatory Authority arbitration panel.
Mr. Gillespie further alleged the annual turnover ratio was indicative of churning, or trading the account excessively. Over a roughly two-and-a-half-year period, he claimed, there were more than $551,000 in commissions generated on an approximately $2 million account, according to the documents.
Mr. Gillespie “had always been a conservative investor and didn’t want to take a lot of risks with his money, yet they put them in these high-risk stocks,” said Bruce Oakes, one of the attorneys who represented him. The brokers then “excessively traded them, which was even worse.”
“There wasn’t any supervision by Oppenheimer,” added Mr. Oakes, a partner at Oakes & Fosher LLC in St. Louis. “They failed miserably in that area.”
An Oppenheimer spokesman said the firm “believes it had strong defenses to this action,” but declined to comment on the award, noting that the firm hasn’t reviewed it.
Mr. Gillespie, in a claim originally filed in 2009, asked the panel for $4 million in compensation from Oppenheimer as well as punitive damages and attorneys’ fees. However, he didn’t directly name either of his brokers.
Mr. Gillespie also made claims against two other firms where his brokers later worked, but those cases were settled.
The arbitration panel found Oppenheimer liable for roughly $848,000 in compensatory damages, as well as interest, $174,000 in attorneys’ fees and $52,000 in costs, but denied the investor’s request for punitive damages. As is customary, the panel didn’t explain the reasoning for its decision, which was dated Thursday.
The panel further denied the two brokers’ requests to have Mr. Gillespie’s allegations wiped from their publicly available broker records.
The ruling will “hopefully show brokerage firms like Oppenheimer they have a duty to protect their clients from brokers who want to engage in wrongdoing like churning or excessively trading an account,” Mr. Oakes said.