Recent FINRA Award Mentioned in Louisiana Advocates Magazine

Breach of fiduciary duties by registered investment advisor; improper investment management and investment recommendations

At the outset of the COVID-19 pandemic, claimant, a 51-year-old entrepreneur, lost over $1 million on a margin call due to the mismanagement of his accounts by his investment advisor and the fiduciary during the stock market’s temporary decline.

In late 2014, claimant acquired $13 million from the sale of a portion of his medical testing company. Claimant invested the funds with the fiduciary and advised it that he had immediate cash needs of approximately $6 million.

Rather than recommending that claimant use a portion of the sales proceeds to satisfy his cash needs, the fiduciary advised claimant (1) to invest all of the sales proceeds in several  managed accounts for which claimant would pay the fiduciary ongoing management fees, and (2) to take out a high balance credit line issued by the fiduciary to satisfy his cash needs for which claimant would pay interest.

The fiduciary then managed claimant’s invested funds in a manner that was inconsistent with his investment profile and objectives.

Claimant alleged that the fiduciary’s use of this purported strategy, which ensured that it could maximize its fees and compensation at claimant’s expense, was a gross violation of its well-established fiduciary duty to the claimant.  When the market declined in February and March 2020 during the COVID outbreak, the fiduciary issued a margin call and sold claimant’s securities at the bottom of the market, causing him to suffer significant financial damages.

In February 2021, claimant filed an arbitration proceeding administered by the Financial Industry Regulatory Authority against the fiduciary seeking recovery of his losses. The fiduciary argued that his claims were “meritless” and that it was not liable to claimant in any way because all of its recommendations were suitable and the claimant did not suffer any losses.

The arbitration hearing took place from January 31 to February 5, 2022. A three-person arbitration panel rejected  the fiduciary’s defenses and awarded claimant $1.1 million, plus interest.

Ridgeway v. UBS Financial Services, Inc., FINRA Case No. 21-00312, 2/16/2022

Plaintiff’s counsel: Lance C. McCardle of Fishman Haygood, L.L.P., New Orleans

Plaintiff’s expert: Harold A. Asher, CPA, ABV, CFF, CFE, FCPA, investments, Metairie


— “Verdicts and Settlements,” April 2022 Louisiana Advocates (Vol. XXXVII, No. 4). Used with permission.