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Merrill Wins $20M Arb Dispute Over American Airlines Investments

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What You Need to Know

  • A trust sought compensatory damages from Merrill over investments one of its reps made in American Airlines stock.
  • The firm was accused of negligence, negligent supervision, breach of contract, breach of fiduciary duty and omission to state a material fact.
  • Merrill declined to comment on the decision. Attorneys representing the trust did not immediately comment.

A Financial Industry Regulatory Authority arbitration panel on Tuesday ruled in favor of Merrill Lynch in a dispute brought against the firm on behalf of a trust that sought $20 million in compensatory damages over investments that one of its reps made in American Airlines stock.

Merrill on Friday declined to comment on the arbitration panel’s decision. Attorneys from the Boca Raton, Florida, law firm Menzer & Hill, who represented the trust, did not immediately respond to a request for comment.

The Amended and Restated Julian I. Stoopler Living Trust filed a claim on or about July 28, 2020, in which it alleged the wirehouse was guilty of negligence, negligent supervision, breach of contract, breach of fiduciary and omission to state a material fact regarding investments made “primarily” in American Airlines common stock.

The trust sought $20 million in accrued statutory interest, compensatory damages, costs, filing and hearing fees, and any other relief deemed appropriate by the arbitrators, according to an award document that the broker-dealer self-regulator posted on its website.

Merrill denied the allegations and asked that the claim be dismissed and that any reference to the matter be expunged from the record of advisor Steven Jay Davidson, who was not named in the claim.

Davidson started his career in the financial services sector with Merrill in 1986 and has been with the firm ever since, according to his report on FINRA’s BrokerCheck website.

A July 2020 customer dispute, included as a disclosure on his report, alleged unsuitable investment recommendations were made on behalf of a client from December 2016 until February 2020.

The dispute was settled for $595,000, and Davidson denied the allegations of wrongdoing. “The firm settled this matter to avoid the cost of litigation and the Financial Advisor did not contribute monetarily towards the settlement,” according to a comment Davidson supplied on the disclosure.

After a hearing in the dispute in Boca Raton, the three public arbitrators decided the trust’s allegations were “factually impossible or clearly erroneous” and “false,” according to the award.

Financial Planning reported the decision Thursday.

(Pictured: A Merrill Lynch branch office; Image: Shutterstock)


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