Edward Jones will pay more than $500,000 in arbitration damages and fees for allegedly playing favorites in the accounts of a divorcing client household, according to the FInancial Industry Regulatory Authority (Finra).
Edward Jones and one of its brokers, Troy Michael Nelson in Bismark, N.D., were found liable on Tuesday by a three-person, non-industry Finra arbitration panel more than four years after a client, Sandra Martire, also of Bismarck, originally filed her claim.
Edward Jones said it is considering appealing the ruling.
"This matter has had a long and contentious litigation history and we're disappointed with the arbitrators’ decision," said an Edward Jones representative in a statement to Financial Advisor. "We are evaluating whether to appeal."
According to Finra’s BrokerCheck website, the arbitration claim was brought in February 2015 by Sandra Hendrickson Martire and her children, alleging that Nelson and Edward Jones breached their fiduciary duty, caused her to hold inappropriate and unsuitable investments, omitted material facts from her, conducted activity in her accounts including churning, fraudulent transfers, forgery, unauthorized activity, and discriminated against her due to her marital status.
Sandra Martire and her ex-husband, Michael Martire, each received $2 million in a 2010 divorce settlement. However, Ms. Martire alleged that she did not receive any payments from the settlement until 2015 because Nelson favored her ex-husband.
Ms. Martire’s arbitration claim also alleged that Nelson and Edward Jones distributed marital funds to her ex-husband without her knowledge from a restricted account, that Nelson and Edward Jones helped her husband open accounts without her consent, and that Edward Jones withheld information from her about the number of accounts the couple had with the firm and the value of the assets held within them. Meanwhile, Martire claimed, the investments in those accounts did not perform as well as the overall market.
Martire and her daughter also alleged that Nelson and Edward Jones failed to terminate life insurance policies in custodial accounts held in trust at the broker-dealer, which led to the depletion of the accounts’ cash value.
Though Martire asked for damages between $1 million to $5 million, the arbitrators ruled that Edward Jones would have to pay Martire $380,862 in compensatory damages with interest, cover $125,000 in attorneys fees and pay Finra’s $600 filing fee.
The abritrators also orderd Nelson to pay $7,253 in damages to Matire's daughter and interest. The arbitrators declined to apply punitive damages to Edward Jones or Nelson.