Securities Litigation & Arbitration Clinic Wins Punitive Damages Against Predatory BrokerAugust 03, 2011
Broker Found Liable for Treble Punitive Damages for Churning Customer’s Account
On August 1, Fordham Law’s Securities Litigation & Arbitration Clinic won an award of $18,876.94 in compensatory damages, representing client Michael Greenfield in an arbitration case against broker Ronald Hardy. The panel also awarded $56,630.82 in punitive damages—three times the compensatory damages—noting that "Hardy preyed on the Claimant, and has demonstrated a disturbing pattern of predatory and unlawful conduct towards other customers as well.”"
"The award of punitive damages sends the clear message that the industry will not tolerate the behavior of brokers who prey on unsophisticated investors," said Fordham Law professor Paul Radvany, who directs the clinic.
In April 2006, Greenfield invested $19,227.33 with Hardy and his employer WestPark Capital. Although Greenfield repeatedly told Hardy not to invest without his knowledge and consent, Hardy continued to execute unauthorized trades excessively and on margin. Hardy “churned” Greenfield’s account, generating huge commissions for himself, and leaving him with just $300.43. While the S&P 500 rose more than ten percent, Greenfield lost 98% of his investment in just over a year and a half. At the same time, Hardy himself earned $12,467 in commissions, or about 65% of the original investment—behavior the arbitration panel found to be "egregious, willful and wanton." In fact, in September 2009, the SEC barred Hardy from any association with any broker or dealer in any capacity. Following the SEC's investigation and subsequent sanction, FINRA has also revoked Hardy's registration.
Fordham Law students Michael Landis and Jason Ruiz worked on the case, while Radvany and fellow professor Romaine Gardner supervised their work. This is the third punitive damage award the clinic has won against unscrupulous brokers within the last three years.
Until the clinic took the case, "I couldn’t get any help from anybody," said Greenfield. "That company and [Hardy] burned me bad, but other lawyers wouldn’t take [the case] because it wasn’t in the millions." About the Fordham Law students who worked on his case, he said "they’ll do very good things in the world."
In October 2010, the clinic, also representing Greenfield, successfully reached a settlement with Hardy’s employer, WestPark Capital, Inc. WestPark agreed to pay Greenfield $24,654.19. Greenfield alleged that WestPark Capital violated FINRA Rules of Conduct by negligently failing to supervise Hardy and that WestPark would have detected the unauthorized and excessive trading had it supervised Hardy properly.
The Securities Litigation & Arbitration Clinic allows students to represent clients in securities arbitrations at FINRA. FINRA was created in July 2007 through the consolidation of National Association of Securities Dealers (NASD) and the member regulation, enforcement and arbitration functions of the New York Stock Exchange (NYSE). Students are given the opportunity to advocate for clients at arbitrations, negotiate with opposing counsel, participate in mediations, prepare witnesses to testify, including expert witnesses, interview prospective clients, analyze stockholder and investment documents, counsel clients, draft legal documents and develop their advocacy skills while deepening their substantive knowledge of securities laws and becoming acquainted with the functioning of the securities industry.