JMP Wins Rare FINRA Verdict

Joshpe Mooney paltzik LLP won a Financial Industry Regulatory Authority (FINRA) arbitration verdict of over $200,000 for its client, Dr. Barry Mankowitz, against Morgan Stanley Smith Barney. The claim arose from Dr. Mankowitz’s attempted purchase in 2001 of shares of stock for his IRA account. Although he received a confirmation of the purchase at the time, Morgan Stanley later claimed that he cancelled the purchase and therefore never owned the stock, thus depriving him of the value of the stock’s appreciation and annual distributions.

Mankowitz thought he owned the stock for over ten years, and the company whose stock he tried to purchase, Plains All American Pipeline, sent him K-1’s each year showing distributions that should have been credited to his account. When he inquired about the location of the shares, however, Morgan Stanley (formerly Salomon Smith Barney), stated initially that the stock was held in the firm’s lost property department. It then changed its position, saying that Mankowitz had cancelled his original purchase order, an assertion Mankowitz vehemently denied.

The verdict came several weeks after a two-day arbitration trial at FINRA’s headquarters in lower Manhattan.

Dr. Mankowitz said, “I am very pleased to have been vindicated with this outcome and am grateful to the arbitrators for hearing my story.” Most commercial disputes with financial brokers are subject to mandatory FINRA arbitration, a forum that is notoriously challenging for customers. In 2014, FINRA arbitration panels awarded customers damages in only 38% of cases decided, an all-time reported low for FINRA. In recent years, legislators and regulators have considered banning mandatory arbitration clauses in financial industry contracts with customers. However, the industry has lobbied aggressively to maintain the mandatory arbitration system.

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