NYSE investigators have followed up on a disciplinary referral from an NYSE arbitration panel that a year ago awarded a Merrill Lynch customer $437,000.
The customer, Hilda Schrettner, of Marco Island, Fla., claimed she was sold unsuitable high-yield bonds by a Tampa, Fla., Merrill broker in May 1995, and that Merrill Lynch failed to supervise the broker. The rep, Gene Wortsman, is no longer with the firm.
In April 1997, a three-member arbitration panel awarded Schrettner $108,562 in damages, hit the firm with $217,000 in punitive damages, and gave Schrettner $100,000 in attorney's fees.
In a one-page summary of the case, the panel said it "recommends that compliance referrals be made with respect to all parties, particularly with respect to Merrill Lynch [sic] lack of supervision."
Merrill, Wortsman and Merrill's Tampa district director, Andrew Edelmann, are the named respondents in the case.
Schrettner's attorney, Thomas Grady of Grady & Associates in Naples, Fla., says Schrettner has since been deposed in Florida by NYSE examiners. Merrill attorneys also were present for the deposition, he says, and were given an opportunity to cross-examine Schrettner.
Grady, a public member of the Securities Industry Conference on Arbitration (SICA), a committee authorized by the SEC to craft rules relating to industry arbitration forums, says this is the first time either the NASD or the NYSE has ever formally followed through on a disciplinary referral from an arbitration panel.
"I know of others--I've seen them--but they were never followed up on" by an SRO other than perhaps a phone call to the firm, Grady claims.
Merrill Lynch did not respond to questions about the case by press time.
NASD and NYSE spokespeople did not confirm whether the SROs have ever formally followed up on a disciplinary referral from an arbitration panel.
Grady says the NYSE's action on the Schrettner case wouldn't have happened "if I hadn't been a pain in the butt." He says he wrote to the NYSE, and after getting form letters back, contacted his congressional representative, the SEC, and met with NYSE officials last December in New York.
Meanwhile, Merrill Lynch has moved to vacate the award in federal court, Grady says, adding that he's countered with a court filing to confirm the award and force the firm to pay his legal fees.