Won dismissal of $26 million FINRA arbitration case defending major broker-dealer, nationally recognized financial advisor and highly capable sales assistant. Claimants were a family LLC and six trusts that held the fortune amassed by the founder of a successful business. With his mental capacity declining, the 90-year old founder replaced himself as LLC manager and trustee with his grandson, who was the primary beneficiary and a registered investment advisor who also held securities sales and supervisor’s licenses with another firm. For years prior to the change in control, our clients had recommended portfolios of laddered, investment grade bonds. The grandson liquidated the bond portfolios and pursued an unsolicited and highly risky investment strategy, losing the entire $26 million fortune in 2008. The claimants alleged that our clients were obligated to intervene and halt the grandson’s risky trading in view of the amount of commission income being generated by the new strategy, the hazards to the founder’s interest and the implication of “elder abuse” by the grandson. We showed that our clients were faithfully executing unsolicited orders and reasonably believed the claimants’ accountant and attorney were involved, and the accounts were to be supervised by the firm with which the LLC manager/trustee was licensed. The arbitrators denied the claims in their entirety.
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