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Securities America Loses $1.2 million FINRA Arbitration

A FINRA arbitration panel ordered Securities America to pay an investor more than $1.2 million in damages related to losses in promissory notes issued by Medical Capital Holdings Inc., which entered receivership in 2009. The sum included $250,000 in punitive damages.

The case, decided on Dec. 31, was the first among dozens of arbitration cases against Securities America involving its sale of Medical Capital notes to proceed to an arbitration hearing, a Securities America spokeswoman confirmed. Private placements are sales of unregistered securities that are supposed to be marketed only to institutions and sophisticated individuals who meet certain income and net worth requirements.

Josephine Wayman, a California-based investor, filed the case against Securities America and one of its brokers, Randall R. Talbott of Newport Beach, Calif., in late 2009, alleging misrepresentation and fraud, among other things, according to the ruling. She sought $729,000 plus interest, legal fees, punitive damages and other relief. The panel ruled that Securities America and Talbott as jointly responsible for more than $905,000 of the total award, including $734,000 in damages plus interest, $111,465 in legal fees and $59,883 in expert witness fees, according to the award. The firm and Talbott must also pay an additional $17,000 in hearing fees, which are typically split between the parties in most cases.

Securities America, however, is solely responsible for the $250,000 in punitive damages. The panel didn’t fully explain its decision, as is customary in arbitration rulings. One paragraph of the ruling, however, suggests that issues related to witnesses and the discovery phase of the proceeding, when parties exchange information, may have prompted the punitive damages.