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Merrill Lynch Ordered to Pay Investors $1.3 Million

A three-member Financial Industry Regulatory Authority arbitration panel has awarded damages to a Florida couple in connection with losses incurred in Fannie Mae preferred stock.

In their May 2011 Statement of Claim, Michelle and Robert Billings alleged that Merrill Lynch, Pierce, Fenner & Smith, Inc. breached its fiduciary duties and acted negligently in connection with the purchase of Fannie Mae preferred stock in the Billings’ accounts. The Billings alleged damages in excess of $1 million.

According to InvestmentNews, unbeknownst to the couple, on July 15, 2008 Moody’s downgraded Fannie Mae preferred stock and Merrill Lynch removed it from its “recommended preferred list.” A mere two weeks later, the Billings purchased $2.3 million of Fannie Mae preferred stock. InvestmentNews reflects that the Statement of Claim alleged that the broker Miles Pure prevented the investors from learning about the negative view of Fannie Mae and purchased the preferred shares despite the “sell” rating made by Merrill Lynch’s own analysts.

The FINRA panel found that Merrill Lynch breached its fiduciary duty in connection with the investment and awarded the customers $1,336,463 in compensatory damages. The arbitrators gave no specific reasons for their decision.

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