A formerly registered investment advisor must pay $1.66 million to a retired teacher after allegedly investing her life savings in leveraged 300% gold bull ETFs, a Finra arbitration panel ruled.
The panel’s award Tuesday ended a five-year quest by senior citizen Marianne Antczak, of Cinnaminson, N.J., to find someone responsible and liable for losses she allegedly suffered in an investment account managed by her advisor, Bridget Fernandez, of Plymouth Meeting, Pa.
According to the arbitration panel, Fernandez was the only entity responsible, and the panel dismissed allegations against co-respondents TD Ameritrade Clearing, TD Ameritrade and TD Ameritrade Investment Management.
Despite 15 pre-hearing and hearing sessions, Fernandez did not enter a single appearance, the award filing said. However, the panel determined that she was still required to submit to arbitration and was still bound by the panel’s decision on all issues.
Antczak had alleged breach of fiduciary duty, aiding and abetting a breach of fiduciary duty, negligence, breach of contract, breach of the duty of good faith and fair dealing, violations of the Exchange Act and civil conspiracy regarding investments in exchange-traded funds. She had requested compensatory damages of $600,000, punitive damages, pre and post-judgement interest, attorney’s fees, and litigation expenses and costs.
Fernandez did not return a call for comment.
The panel determined Fernandez was liable for $687,944 in compensatory damages; $297,222 in monthly compounded pre-judgement interest; post-judgement interest of 6% a year until the award is paid; $500,000 in punitive damages; $3,155 in costs; and $174,338 in attorneys’ fees.
During the hearing, Antczak tried to have elder financial exploitation added to the allegations against TD Ameritrade, arguing that the clearing firm should have recognized that Antczak was being taken advantage of by Fernandez and should have reported the alleged exploitation to the authorities for investigation, the award filing said. But based on the evidence presented, the panel found that TD Ameritrade did not owe her a duty to supervise her transactions, the award filing said.
“Claimant did present adequate evidence for the panel to conclude that the acts of Fernandez were sufficiently egregious and, in some cases, outrageous to find that Fernandez should be held liable for the losses sustained by Claimant,” the panel found. “As Fernandez chose not to appear at the hearing and defend her actions, the Panel had no choice but to consider the evidence presented as fact.”
According to the Finra panel, the value of Antczak’s accounts on Dec. 31, 2012, were $714,786, which was also the time Fernandez allegedly began making unsuitable investments. Fernandez stopped being a registered investment advisor in November 2014 but allegedly lied about her status, the award filing said. On Dec. 31, 2016, when Antczak stopped allowing Fernandez to make trades on her behalf, her accounts were worth $26,842, the panel said.
And while “punitive damages are not commonly awarded in Finra arbitrations and are reserved for egregious, reckless conduct by a brokerage firm or financial advisor,” the award stated, “the panel has concluded that Fernandez’s conduct was indeed egregious.”
Prior to filing an arbitration with Finra, Antczak had first filed a class action lawsuit Nov. 3, 2017 in U.S. District Court for the Eastern District of Pennsylvania against Fernandez, her firm Ultimate Financial Investments, and the brokerage custodian Fernandez used, TD Ameritrade Clearing, according to the original complaint. Also named were TD Ameritrade and TD Ameritrade Investment Management.
In the spring of 2018, Antczak dropped the class action lawsuit and on May 30, 2018, agreed to bring her charges to arbitration before a Finra panel.
According to the original class action lawsuit, Antczak and Fernandez met when Fernandez worked at UBS Financial Services, where she worked from June 2005 to December 2007 and again from November 2010 to February 2012.
“While Mrs. Antczak's account was still at UBS, her portfolio was pretty typical for a retired schoolteacher—about a third of it was in bonds, the rest was in cash, stocks and preferred stocks,” the lawsuit said.
In June 2012, Fernandez formed her own firm, Ultimate Financial Investments (UFI), and invited her former UBS clients to join her, including Antczak. UFI was accepted to the TD Ameritrade Institutional platform and cleared its trades through TD Clearing, the original lawsuit said.
When Antczak transferred her accounts to UFI in July 2012, she had just over $660,000, the lawsuit said. Fernandez then began investing the total portfolio in a “daily leveraged 300% gold bull ETF,” the lawsuit said.
On April 17, 2014, TD Ameritrade and TD Clearing terminated its clearing agreement with UFI, blocked Fernandez’s access to customer accounts and notified Fernandez’s clients, the lawsuit said.
On the same day, Fernandez sent a letter to her clients saying her relationship with TD Ameritrade had been terminated without cause, and clients who wanted her to continue managing her money could send her their new username and password at TD Ameritrade, the lawsuit said.
By December 2015, Antczak’s accounts had dropped to $110,000 following an extended period of investment in unsuitable vehicles, wherein Fernandez was “basically gambling away the funds in the brokerage accounts of unsophisticated, conservative, long-term investors she had unfettered discretion to trade in,” the lawsuit said. “UFI's pattern of using margin, buying options, buying options on daily leveraged 300% gold bull ETFs, selling quality investments at a loss and increasingly moving UFI clients' money into larger and larger buy-and-hold positions primarily in two daily leveraged 300% gold bull ETFs was sheer lunacy.”