An all-public panel of FINRA arbitrators entered a preclusion order and awarded $750,000 in punitive damages for Respondents’ failure to participate in discovery and disregard of pre-hearing filing requirements.
Claimant filed a suitability claim (along with the usual companion counts) over some proprietary fund investments, among others. Respondents’ discovery responses originally were due January 17, 2014. They did not oppose Claimant’s March 2014 motion to compel and the Chair ordered production. Respondents failed to produce documents and responded only later to the sanctions motion, claiming that the brokerage was defunct (though it had just settled an SEC action). The full Panel ordered production and sanctions of $1,000 per day for non-compliance after that October 20 order. By the time of the December 2 hearing, Respondents still had not produced documents and their new counsel argued the new discovery that a prior encrypted disk in fact was blank.
The Panel granted Claimant’s motion to preclude Respondents from presenting any evidence at the December 2 hearing. The Panel awarded Claimant the $500,000 compensatory damages sought, plus $750,000 in punitive damages (for among others, failing to pay the previously-ordered discovery sanctions or to file a pre-hearing brief, witness or exhibit lists).
The case is Lowery v. John Thomas Financial, No. 13-02763 (FINRA Jan. 2, 2015), as noted in Securities Arbitration Commentator (UA 2015-03).