CASE CU Entitled to $1 Million in CMO Investment Breach Claim
According to the Financial Industry Regulatory Authority award dispute resolution signed on May 14, the $180 million CASE CU alleged that its investment committee met with Mark Wickard, an agent for Prudential Equity, to discuss the Lansing, Mich.-based credit union's portfolio. Wickard said investing in CMOs and interest-only strips was "safe and suitable," according to CASE. The CU said that shortly after making the investments, they began to show a loss, never recovered and were sold at a loss through another broker.
Prudential Equity denied the allegations, saying it acted in good faith and any alleged damages sustained by CASE were the result of market forces and omissions of individuals, entities and conditions over which it had no control.
Prudential Equity said CASE failed to state a claim upon which relief can be granted and that it also authorized or ratified all transactions, according to the FINRA resolution. The firm also said the credit union's claims are barred by statutes of limitation and other legal limitations. It added that Prudential Equity's conduct was not the proximate cause of any damages allegedly sustained by CASE. The firm said CASE failed to mitigate any damages and was responsible for the transactions and the alleged investment losses.
CASE sought $3 million in actual and compensatory damages. After reviewing the case, the three-member arbitration panel ordered Prudential Equity to pay $900,000 in compensatory damages, $48,443 in interest, $30,000 in costs and $50,000 in attorney fees. Prudential Equity must also pay $26,500 in fees to the FINRA dispute resolution panel to conduct the case's hearing sessions.