Panel awards $3.8m to ‘mom and pop’ investors whose risky investments tanked | Trump administration
In a victory for ordinary investors, arbitrators awarded $3.8 million in damages to 13 Florida seniors who claimed a financial advisor squandered their retirement money by pouring it into risky investments.
The award comes after the Guardian highlighted their losses as part of an investigation into the dangers facing so-called “mom and pop” investors at a time when the Trump administration is throwing its weight behind Wall Street efforts to sell them higher-risk “alternative investments”.
Many of the investors claimed they lost most of their life savings after the adviser put them into “structured products” – a risky combination of bonds and derivatives that regulators have flagged as mandatory.increased controlby brokerage firms.
An arbitration panel with the Financial Industry Regulatory Authority (Finra) last week ruled that three financial firms — Charles Schwab & Co, TD Ameritrade Clearing Inc and TD Ameritrade Inc — must pay damages to Florida investors who claimed Schwab did not properly supervise the advisor.
Advisor Mario Payne used Schwab and Ameritrade, which Schwab acquired in 2020, to execute his trades. Payne was not named as a defendant, but investors alleged that he engaged in misconduct in his claims.
The $3.8 million award comes as Finra arbitration faces major challenges for those challenging financial companies. Last year, the public won only 28% of lawsuits against Wall Street firms.
“Awards of this size and nature to large national brokerage firms are rare indeed,” said Robert Banks, a senior securities attorney who represents investors suing financial firms.
Payne did not respond to requests for comment on the award to Schwab or to the Guardian’s previous requests for comment.
A Schwab spokesperson said in an emailed statement: “We empathize with these investors, but the decision was legally wrong. All investment choices were made by plaintiffs and their independent financial advisors, not by Schwab, whose sole role is as custodian of accounts.”
Last month’s Guardian report described an accelerating push by Wall Street, lawmakers and the Trump administration to make it easier for mom-and-pop investors to buy so-called “alternative investments,” which include a range of risky products that don’t fall into ordinary categories such as stocks, bonds or money market funds.
In August, Donald Trump issued an executive order promising that his administration would smooth the way for Americans to purchase so-called “alts” for their 401(k)s. Trump’s order also aims to make it harder for investors to sue players who control 401(k) plans for wrongdoing; The order claimed that it made it difficult for Americans to obtain “the competitive returns and asset diversification necessary to ensure a dignified, comfortable retirement.”
Michael Bixby, the Florida attorney who represented investors who won the case against Schwab, said arbitrators awarded “full awards” that reflected how much investors could have earned if their money had been in a balanced portfolio of stocks and bonds rather than structured products.
Other Bixby customers had lost two previous arbitrations against Schwab regarding Payne. In its response to their recent losing bet, Schwab said Payne played no role in selecting or auditing the securities he recommended and noted that the firm used the trading platform but was not audited by Schwab.
Payne is no longer affiliated with Schwab. Regulatory records show that he is now chief compliance officer of the investment advisory firm he owns.
Investors who won the case approached the news with cautious optimism. A Schwab spokesman declined to comment when asked whether the firm plans to file a motion to vacate or modify the arbitrator’s decision.
Former Payne client Cathy Shubert, whose story was featured in the Guardian investigation, was awarded $139,650 by arbitrators. He said he wouldn’t celebrate until he saw his check.
“I worked for 40 years and it wasn’t easy for me to earn the money I paid him,” he told the Guardian. Receiving the money will “definitely ease the burden on me.”
Like many investors, Sonja Mattingley, a 65-year-old traveling nurse who lives in Florida, took on more work as her portfolio was depleted. He said his plan was to start being less useful by now, but “that fell through” due to his losses with Payne.
Mattingley was awarded approximately $95,000. When reached for her reaction to the umpire’s decision, Mattingley was in the middle of a 90-minute drive to Jacksonville, where she would take a second nursing job.
