Among the many things she had to deal with in the wake of her husband’s death, a widow in her late sixties came across what she believed were financial irregularities in her late husband’s investment accounts. While she was overwhelmed by the buy and sell orders for stocks of companies that had declined in value before going out of business, she had never actively been involved in managing or even discussing the couple’s investment accounts. In fact, the trust relationship with their financial advisor was such that they often didn’t even open their investment account statements. Yet, the thing that caused her scratch the surface and question these trades was that many of the buy-sell orders were dated when she and her husband were traveling out of the country and, thus, could not have given authorization for the transactions.
The brokerage’s manager agreed that the orders appeared suspect and that the types of stocks being bought and sold were not suitable for customers of the couple’s age, asset mix, or risk tolerance. One issue – or, in hindsight, blessing in disguise -- was that the adviser who had made the unauthorized trades no longer worked for this company. In addition, the brokerage manager figured his risk was capped, because the statute of limitations had passed on at least a chunk of the unauthorized trades. Nonetheless, the broker wisely appreciated the potential for bad publicity, even if the matter ever went to confidential arbitration. The company agreed to the suggestion to mediate, and the parties mindfully selected an attorney with securities arbitration experience to mediate.
The mediator’s experience in securities matters helped the widow understand the limitations of the remedies she might be able to get if she pursued arbitration, which included the legal hurdle of the statute of limitations, the binding nature of arbitration, and the cost of arbitrating (filing fees, arbitrator costs, court reporter fees, expert witness, etc.). At the same time, even though the brokerage house may have been more sophisticated about the pros and cons of arbitration, the mediator’s experience was invaluable in focusing the parties on a win-win outcome.
When selecting a mediator, his or her range of experience in various forums or industries should be a consideration. A specialty mediator in an industry like securities can enlighten the parties on the positives and negatives of moving toward a litigation forum where both sets of lawyers may have limited experience. This alone could help the parties save significant aggravation and resources.