An NASDR arbitration panel in January denied a customer suit filed against an Everen Securities broker and awarded the firm and the rep $36,216 as restitution for what the panel found to be a frivolous claim.
The client, a doctor, filed the $5 million arbitration claim charging that he shouldn't be forced to honor a stock purchase because he didn't know Everen was a market maker in the issue.
According to arbitration filings, the respondent broker, Larry Bain, in Everen's Woodmere Village, Ohio, branch, had handled trades for the claimant--physician Nabil Malek--for more than 10 years. Malek was "a highly sophisticated, high risk tolerant, high-net-worth player," said Everen and Bain in arbitration documents, "with a voracious appetite for trading speculative technology stocks on a short-term basis."
The client had rarely accepted Bain's recommendations over the years, and the firm had even required Malek to sign an indemnity agreement because of his aggressive margin trading, the respondents asserted.
Malek told arbitrators Bain "pressured him" in 1997 to buy 20,000 shares of Ascend Communications. When he got the confirmation, he "discovered for the first time" that Everen was a market maker in Ascend. Malek immediately called Bain and demanded recision of the trade. When Everen refused, Malek filed a claim for "unauthorized charging to his account." He asked for punitive and treble damages.
"It was just sour grapes," Bain says. Malek wanted to back out on the trade, Bain says, because Ascend's price dropped from 52 to 22 immediately after the purchase. Bain says he proved Malek still owned the stock, which Bain says traded near Malek's purchase price at the time of the hearing.--P.F.