Eight months after The Law Offices of Jonathan W. Evans & Associates filed an arbitration claim against Newport Coast Securities over a multitude of misconduct, including elder abuse; negligence; unsuitable recommendations, misrepresentation and fraud; breach of fiduciary duty; and churning, a FINRA arbitration panel found Newport Coast liable for compensatory and punitive damages, and ordered the firm to pay these, plus costs. FINRA Arbitration Award Case No. 14-03861
The arbitration claim pertained to Newport Coast Securities' illicit conduct linked to churning and unauthorized trading securities including exchange traded funds (ETFs), and short positions on stocks, and culminated with the panel's finding and order that the firm pay $57,000 in compensatory and punitive damages, plus interest, as well as costs and fees for a grand total in excess of $100,000.
According to Newport Coast Securities' BrokerCheck report, the firm in past years received regulatory and disciplinary sanctions over its supervisory failures and misrepresentations, and most recently found itself the subject of a pending FINRA inquiry into misconduct relating to its ETF business and alleging the firm not only held short-term ETFs in accounts for an extended period of time, but also engaged in potentially unsuitable concentration of these ETFs.
A day after the Award was issued, Newport Coast Securities began moving brokers to another firm, WestPark Capital. Two weeks after being found liable of wrongdoing and ordered to pay the arbitration award, Newport Coast Securities filed paperwork with FINRA, the SEC, and NASDAQ requesting to terminate its registrations.
While every case is different and the results of this case are unique, the story of firms going out of business to avoid arbitration awards is an old story. In February 2016, the Public Investors Arbitration Bar Association ("PIABA") recently proposed FINRA create a system to pool money to pay successful arbitration awards when firms like Newport Coast Securities fail to the pay the awards. The proposal came by way of a PIABA study which found one in three successful investor arbitration awards go unpaid. PIABA'S study caught the attention of Elizabeth Warren who, on March 3, 2016, publicly skewered FINRA'S outgoing chief executive, Richard Ketchum, about why FINRA ran an arbitration system which resulted in so many unpaid awards. With the publicity of the problem achieving political attention, in July 2016, FINRA announced it was considering the creation of a fund to pay unpaid arbitration awards.
While FINRA'S efforts will likely be too late for the Claimants in this case, there is a ray of hope that this dirty little secret of the FINRA Arbitration system will be fixed.
If you have invested with any brokerage firm whose misconduct ranging from negligence and breach of fiduciary duty to elder abuse, misrepresentation, unsuitability and fraud has proven harmful to your investments and interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.