A 60 year old doctor invested $100,000 he had in an IRA with a FINRA broker.
The broker put the funds into an after-tax account, triggering a $35,000 tax liability.
Over the next 14 months, during which time the S&P 500 increased in value, the portfolio lost a whopping $86,000, reducing its value to $14,000.
This is not surprising given the amount of trading by the broker. His commissions were so huge that the account would have had to earn 31% just to break even! The broker used margin to generate even more trades.
The stocks in the portfolio were 600% more volatile (risky) than the S&P 500.
Before any Judge or jury, the investor would have recovered his losses and most likely would have received a meaningful award of punitive damages.
Not before the FINRA arbitration panel.
They found that the broker had to pay back only the tax liability caused by the transfer of the IRA to a taxable account.
Now for the unbelievable part.
This "impartial" FINRA arbitration panel concluded that the broker did nothing else wrong. No unsuitability. No excessive trading. They gave him a clean bill of health.
Just another day at the office, ripping off investors with impunity. Instead of being drummed out of the industry, he is happily back in his office high fiving his fellow brokers.
So much for FINRA "self-regulation."