Published April 05, 2013
U.S. securities arbitrators ordered a former employee of Merrill Lynch, Deutsche Bank and Oppenheimer & Co to pay nearly $11 million to an investor who alleged the broker misrepresented securities and made excessive trades.
The investor's case against former broker Karl Hahn stems from transactions involving covered calls, a variable annuity and other investments, according to a ruling by a Financial Industry Regulatory Authority (FINRA) arbitration panel.
The investor, Chase Bailey, filed the case in 2011, also naming Bank of America Corp's Merrill Lynch unit, Deutsche Bank Securities Inc, a unit of Deutsche Bank AG and Oppenheimer & Co.
Hahn worked at the three firms consecutively for roughly seven years between 2004 and 2011, according to his public disclosure record. The case against Merrill was settled, while those against Deutsche Bank and Oppenheimer were dismissed, according to the ruling.
"Mr. Bailey is pleased with the award and hopes it serves as a deterrent to future improper conduct," said Michael Perry, the investor's Boston-based lawyer.
Hahn's alleged conduct toward Bailey, who is an internet entrepreneur and now a New Hampshire-based filmmaker, occurred while the broker worked at all three firms, Perry said.
Efforts by Reuters to reach Hahn for comment on Friday were not successful.
A Merrill spokesman declined to comment. A Deutsche Bank spokeswoman said the firm terminated Hahn after becoming aware of professional misconduct. A spokesman for Oppenheimer was not immediately able to comment. Oppenheimer terminated Hahn in 2011, according to regulatory filings.
Arbitrators awarded the investor some $4.1 million in compensatory damages and $6.4 million in punitive damages, according to the ruling dated on Tuesday. Punitive damages awards, aimed at deterring misconduct, are rare, say lawyers.
The decision is the second against Hahn in two months. FINRA arbitrators, held Deutsche Bank and Hahn jointly responsible in February in a $934,000 ruling on behalf of a couple and their trusts, who alleged he swindled them in a multimillion-dollar insurance deal.
(Reporting by Suzanne Barlyn. Editing by Andre Grenon)