A Financial Industry Regulatory Authority (“FINRA”) panel has awarded $1,333,333 in damages to a Laguna Hills couple. The investors, Hooman Moshar and his wife May Moshar, filed the FINRA claim in 2011 against Wells Fargo Advisors, LLC (“Wells Fargo”) for losses sustained in unspecified exchange-traded funds (ETFs).
The Moshars alleged that Wells Fargo breached its fiduciary duty; breached the customers’ contract; made material misrepresentations and omissions; committed fraud; failed to supervise its broker Sylvia Szabo-Larson; and violated securities industry rules. The claim sought rescission of the ETF trades or compensatory damages in the approximate amount of $1.9 million.
According to the Chicago Tribune, the Moshars’ account was initially with Wachovia Securities, which later became Wells Fargo. The Moshars had taken a $5 million loan with Wachovia Bank, secured by the brokerage account, in order to invest in real estate. When the value of the brokerage account began to fall, the Moshars’ broker recommended that the couple invest in ETFs, including leveraged ETFs, in an attempt to make up some of the losses. The Moshars alleged that the recommendations to use the brokerage account as collateral for the loan and to purchase the leveraged ETFs were unsuitable.
The FINRA Panel provided no explanation for its decision. The Panel awarded the Moshars $1,333,333 in compensatory damages and ordered Wells Fargo to pay the full $24,000 of forum fees which typically are split by the parties.