Finra arbitrators order former advisor to pay $664,901 for unsuitable options strategy

investmentnews.com:

Finra arbitrators ordered a former financial advisor to pay more than $600,000 for recommending risky options strategies for a group of Alabama investors.

The investors filed an arbitration claim in July 2021 against Norman Edgar McNeill and McNeill Financial Advisory. The causes of action included unsuitability; negligent misrepresentation and suppression; breach of contract; controlling person liability and violation of the Alabama Securities Act.

“The causes of action relate to allegedly improper investment in unsuitable and high-risk option investment strategies,” according to the award document posted Wednesday.

Finra has increased its scrutiny of options trading and disclosures. The broker-dealer self-regulator runs the arbitration system that adjudicates disputes between customers and brokerage — and sometimes between clients and investment advisors. But the regulator does not participate in deciding awards.

A three-person Financial Industry Regulatory Authority Inc. arbitration panel found McNeill and the firm liable and ordered them to pay the claimants $222,927 in compensatory damages; $74,300 in pre-award interest; $342,550 in attorneys’ fees; $24,723.6 in costs; and a $400 reimbursement for a filing fee. The total award was $664,901.47.

The claimants — Patricia Capps, Mary Martin, Terry Michael Wheeler, Wanda Wheeler, Raymond Capps and Clifford Capps— did not request a specific amount of damages in the claim. For instance, they asked for compensatory damages “in an amount to be determined by the arbitration panel.”

Some of the damages were awarded to the claimants for losses related to individual retirement accounts and some to nonqualified accounts. But damages also were denied to some nonqualified accounts.