Wedbush Slammed in Elder Abuse Case
(Updates with comment from customers’ lawyer and details of the alleged violations throughout.)
An arbitration panel threw the book against Wedbush Securities in an elder abuse case this week, ordering the firm to pay $1.4 million in damages and commission disgorgement to a couple who invested in long-term municipal bonds and structured certificates of deposit.
It also ordered the Los Angeles-based company to pay the couple’s former broker almost $60,000 of lawyers’ fees and costs, upholding his claim for indemnification despite finding him and Wedbush liable for unauthorized trading and violation of California’s elder abuse statute.
The decision, posted Thursday on the Financial Industry Regulatory Authority’s arbitration awards website, went beyond what the claimants sought monetarily, underscoring what may be adjudicators’ growing sensitivity to allegations of elder abuse.
“This is a classic case of elder financial abuse, which is a growing trend across the industry,” said Robert J. Girard, a Los Angeles lawyer who represented the couple who were 87 and 91 years old when the claim was filed in March 2016. “The award speaks volumes.”
A spokeswoman for Wedbush declined to comment on the decision.
Mark F. Augusta, the couple’s former broker, did not return a call for comment to his office at his current employer, Hilltop Securities in Del Mar, Calif. The customers had worked with him for more than a decade, according to Girard.
Augusta resigned from Wedbush in May 2015, a day after the firm received a complaint alleging age-unsuitable investments from an unnamed customer’s accountant, according to his BrokerCheck record. Augusta has accumulated 15 customer complaints over his 31-year career as a registered representative, according to the database.
Although the arbitrators awarded the broker $110,000 for legal fees and costs related to the case that extended for about 16 months, they deducted $50,172 from the amount because of Augusta’s “improper conduct,” according to the award decision. Both the broker and Wedbush were named as respondents in the complaint, which was filed in March 2016 by Agatha Dancy on behalf of herself and her husband John Dancy.
While muni bonds and CDs are generally viewed as conservative investment classes, the ones traded by Augusta for the couple included structured instruments with derivative features, the lawyer said.
The three-person arbitration panel ordered the firm to pay the couple $1.1 million of punitive damages, reimburse them $110,000 in commissions and cover their legal bill of $277,691 plus $29,000 of arbitration costs.
The arbitrators also awarded the clients $250,000 in compensatory damages. They had sought $247,000 of general and compensatory damages, asking for return of commissions over the life of their accounts at Wedbush, according to the arbitration award ruling. They also asked for unspecified damages.
The panel calculated the $1.1 million punitive damage award under terms of California’s Elder Abuse and Adult Civil Protective Act, according to the ruling. The award did not include payment for “lost opportunity costs” that the couple sought.