In a victory for everyday investors, arbitrators awarded $3.8 million to 13 Florida seniors who claimed a financial advisor wasted their retirement money by investing it in risky investments.
The award comes after The Guardian highlighted these investors’ losses as part of an investigation into the dangers faced by so-called “family” investors at a time when the Trump administration has supported Wall Street’s efforts to sell them more risky “alternative investments.”
Many of the investors claimed they had lost most of their life savings after the adviser put them into “structured products,” a risky combination of bonds and derivatives that regulators have said requires “increased oversight” by brokerage firms.
A Financial Industry Regulatory Authority (Finra) arbitration panel ruled last week that three financial firms – Charles Schwab & Co, TD Ameritrade Clearing Inc and TD Ameritrade Inc – should compensate Florida investors, who had alleged that Schwab had failed to adequately supervise the adviser.
The advisor, Mario Payne, used Schwab and Ameritrade, which Schwab purchased in 2020, to execute his trades. Payne was not named as a defendant, but the investors alleged misconduct on his part in their lawsuit.
The $3.8 million award came amid great difficulties for those challenging financial firms in the Finra arbitration. Last year, the public won only 28% of its cases against Wall Street companies.
“Settlements of this size and nature against major national brokerages are truly rare,” said Robert Banks, a veteran securities attorney who represents investors suing financial companies.
Payne did not respond to requests for comment on the award against Schwab or to previous requests for comment from The Guardian.
A Schwab spokesperson said in an emailed statement: “We empathize with these investors, but the decision was legally incorrect. All investment decisions were made by the plaintiffs and their independent financial advisor and not by Schwab, whose sole role was as custodian of the accounts.”
The Guardian report last month outlined an accelerated push by Wall Street, lawmakers and the Trump administration to make it easier for mom-and-pop investors to buy so-called “alternative investments,” which include a variety of risky products that don’t fall into the simple categories of stocks, bonds or money market funds.
In August, Donald Trump issued an executive order promising that his administration would pave the way for Americans to purchase so-called “alts” for their 401(k) plans. Trump’s order also seeks to make it more difficult for investors to sue for irregularities committed by actors who control 401(k) plans, which, according to the order, have made it difficult for Americans to achieve “the competitive returns and asset diversification necessary to ensure a dignified and comfortable retirement.”
Michael Bixby, a Florida attorney who represented investors who won the case against Schwab, said arbitrators gave a “complete award” that reflected how much investors would have had if their money had been in a balanced portfolio of stocks and bonds, rather than structured products.
Other Bixby clients lost two previous arbitrations against Schwab regarding Payne. In its response to the lawsuit they recently lost, Schwab said it played no role in selecting or supervising the securities recommended by Payne, noting that it used the firm’s trading platform but was not supervised by Schwab.
Payne is no longer associated with Schwab. His regulatory records indicate that he is currently the chief compliance officer of the investment advisory firm he owns.
Investors who won the case were cautiously optimistic about the news. Schwab’s spokesman declined to comment when asked if the firm planned to file a motion to vacate or modify the arbitrators’ award.
Cathy Shubert, a former Payne client whose story appeared in The Guardian investigation, was awarded $139,650 by arbitrators. He said he won’t celebrate until he sees his check.
“I worked for 40 years and it wasn’t easy for me to earn the money I gave him,” he told The Guardian. Getting the money “will certainly take the burden off my shoulders.”
Like several of the investors, Sonja Mattingley, a 65-year-old travel nurse who lives in Florida, has taken on more work because of her depleted portfolio. He said his plan had been to start working less at this point, “but that was ruined” by his losses with Payne.
Mattingley received almost $95,000. When Mattingley was contacted for her reaction to the referees’ ruling, she was in the middle of a 90-minute trip to Jacksonville, where she had a second nursing job.
