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Stockbroker Denied Expungement In Suitability and ETF Arbitration
April 20, 2015
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in March 2013, Claimant Marriott asserted breach of fiduciary duty; common law fraud; violation of the Texas Securities Act; violation of the Texas Deceptive Trade Practices Act; and lack of adequate supervision in connection with allegedly unsuitable purchases purportedly made in Claimant's Individual Retirement Account without her knowledge or consent. Among the disputed transactions were alleged short-term trades in shares of Apple, Rare Element Resources Ltd., and Zynga,. Claimant also cited trades in exchange-traded inverse funds ("ETFs"), including ProShares, Rydex, and Direxion. In addition to her allegations above, Finally, Claimant alleged that Respondent Hobbs had developed over-concentrated position of AIG shares. In the Matter of the FINRA Arbitration Between Patricia Marriott, Claimant / Counter-Respondent, vs. Andrew Garrett, Inc., Respondent, and Brian Keat Hobbs, Respondent /Counter-Claimant (FINRA Arbitration 13-00769, April 1, 2015).
Denials And Counter-Claim
Respondent Andrew Garrett, Inc. generally denied the allegations and asserted various affirmative defenses.
Respondent Hobbs generally denied the allegations , asserted various affirmative defenses, and filed a Counter-Claim against Marriott asserting constructive fraud; negligent misrepresentation; and breach of contract. Counter-Claimant Hobbs alleged that Counter-
Respondent Marriott:
- was well informed regarding the market and her account,
- had instructed Hobbs to engage in trading ETFs, and
- had accumulated her shares of AIG stock but did not instruct him to sell the shares until 2010.
Hobbs requested the expungement of the arbitration from his Central Registration Depository records ("CRD") (Andrew Garrett, Inc. joined in the expungement request following the initiation of the hearing on the merits.)
Settlement
During the June 3, 2014 hearing, the parties advised the FINRA Arbitration Panel that they had settled the matter. Accordingly, the Panel made no determination with respect to any of the claims or counterclaims asserted by the parties.
Expungement Consideration
Claimant did not oppose the requested expungement of Respondent Hobbs' CRD; and Claimant did not participate in the expungement hearing.
Following a January 2015 expungement hearing, the FINRA Arbittration Panel denied the motion for expungement.
Bill Singer's Comment
FINRA's online BrokerCheck records as of April 20, 2015, disclose that Respondent Hobbs was registered with member firm Andrew Garrett Inc. from January 2005 to March 2013.
BrokerCheck also discloses under the heading of "Customer Dispute - Settled," FINRA member firm Andrew Garrett, Inc. characterized Claimant Marriott's allegations as:
UNAUTHORIZED TRADES, UNSUITABLE TRADES, BREACH OF FIDUCIARY DUTY, FORGERY
The BrokerCheck disclosure sets the "Alleged Damages" at $125,000, and further discloses that the matter settled on July 1, 2014 in the gross amount of $120,000, of which Respondent Hobbs contributed $70,000.
BrokerCheck records further disclose under "Customer Dispute - Pending" that member firm Andrew Garrett, Inc. reported that it had received another customer complaint against Respondent Hobbs dated February 26, 2014, alleging $63,009 in damages based upon allegations:
CLIENT COMPLAINED ABOUT LOSSES IN ACCT, UNSUITABLE INVESTMENTS, UNAUTHORIZED TRADES
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