(Dow Jones) A securities arbitration panel has ordered Ameriprise Financial Services Inc. to pay nearly $470,000 to an investor, including sanctions and legal fees, after finding, in part, that a broker allegedly altered the investor's records.
Ameriprise Financial Services, a unit of Ameriprise Financial Inc. (AMP) in Minneapolis, and David Tysk, a broker in the firm's Bloomington, Minn., branch, must jointly pay an investor $466,000, including $213,000 in legal fees and $20,000 for sanctions, according to a Financial Industry Regulatory Authority panel award dated May 14.
The investor, Guenther Roth of Wayzata, Minn., sought nearly $1.1 million in the case, which was filed in 2008. He alleged that Ameriprise and Tysk recommended and purchased more than $2 million in unsuitable annuities using Roth's fixed-income account, according to the award. Roth, who was 77 years old at the time of the purchase, said the annuities carried heavy surrender fees for 10 years and generated income that was taxed at a rate nearly double that of other investment choices, according to the award.
Ameriprise and Tysk denied the allegations, saying that they acted on information Roth provided and that it didn't have discretionary authority over his accounts, according to the award.
Roth was awarded $197,000 in compensatory damages. The panel, however, also ordered Ameriprise and Tysk to pay legal fees, witness fees and sanctions, after including written findings for its decision. Lawyers say the panel's measures are unusual.
Tysk, said the panel, allegedly altered a record related to a contact he had with Roth, after the investor complained about suitability, according to the panel's findings.
The panel also found that Ameriprise allegedly didn't update information it provided to Roth during the proceedings, even after it learned that Tysk allegedly altered the file, according to the award. The investor, the panel wrote, had to file an emergency action before the panel to gain access to the changed information on Tysk's computer, said the award. Ameriprise also allegedly engaged in other acts to block the exchange of information, known as discovery, the panel wrote.
Tysk said the panel's "cryptic findings" about his records of contact with Roth, the investor, are unfair. The panel "fails to acknowledge that nothing was deleted from the contact notes, nor was any item pointed at as being inaccurate," he said.
"Sanctions for discovery violations in arbitrations are rare, but becoming more frequent as parties become more aggressive in trying to win their cases," said Mark Dobin, a securities lawyer in Jupiter, Fla., who is also a Finra arbitrator. The $213,000 legal fee award also "seems high" compared with the overall reward, he said.
"We don't see this type of evidence a lot," said Thomas E. Jamison, a Minneapolis-based lawyer who represented Roth. "It's an usual award in that respect, and richly deserved in this case, given some of the things that went on," he said.
The panel also ordered Ameriprise and Tysk to pay more than $15,000 in Finra hearing fees. Arbitration parties typically share those fees, say lawyers.
"We believe strongly that David Tysk operated in the best interest of his client, who is a sophisticated businessman," said an Ameriprise spokesman. He added, "We follow all the rules regarding discovery in Finra arbitration and did so in this case."
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