A former client won more than $1.2 million in damages from an advisor and her firm. A FINRA arbitration panel sided with the client over the advisor's alleged misconduct, including breach of fiduciary duty and unsuitability, in a dispute over retirement planning advice.
In arbitration, this outcome happens less often than not. Last year, clients won damages in 38% of 465 arbitration cases in which they were claimants, according to FINRA statistics. Many cases are settled before arbitrators even make a decision. In 2014, more than half of all arbitration cases were resolved through a settlement.
This recent case began when Cindy-Marie Rogers received retirement advice from her former advisor, Joan Norton, who is affiliated with Ausdal Financial Partners, an independent broker-dealer based in Davenport, Iowa.
According to Robert Pearl, an attorney representing Rogers, Norton advised Rogers, a Verizon employee who was earning about $80,000 per year, on rolling over a $529,000 lump-sum pension payout plus an $85,000 401(k) plan into an IRA and buying a variable annuity.
At age 49, Rogers took an early retirement after being advised by Norton that she could afford to do so, in part through a provision in the tax code that permitted early withdrawal from qualified retirement accounts under certain circumstances, Pearl says.
He says that Rogers soon discovered that the 7% withdrawal rates she needed to meet living expenses were depleting her savings and exceeded what was permitted under IRS rules, meaning she got hit with a steep tax bill.
The withdrawal rate, Pearl notes, is also higher than what is typically recommended for retirees. Rogers was eventually forced to take a job as a health care worker making little more than minimum wage, Pearl says.
"Giving up a job for a promise that you have enough to live on that's what this case is about," he says.
A spokesman for Norton said she strongly disagreed with the panel's decision.
"She continues to believe that the claim is without merit, and she intends to vigorously contest the claim through further appeal. Beyond that, and as a matter of policy, she is unable to publicly discuss pending legal matters," the spokesman said in an email.
The arbitration panel ordered Norton and Ausdal to pay Rogers $1.24 million in damages plus interest of 12% per annum from May 16, 2014 until the award is paid in full. The panel also ordered them to pay additional costs of about $10,000.
As part of the hearings, Norton and Ausdal filed a motion to expunge the matter from their CRD records, but the panel denied their request.
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