FINRA Clears SECU Brokerage
After weighing the evidence, a Financial Industry Regulatory Authority arbitration panel recently denied all claims against SECU Brokerage Services Inc. in an estate dispute.
In a convoluted case, the securities regulator heard the matter at an arbitration hearing held in San Diego Feb. 21-24. The dispute involved SECU Brokerage, an investment adviser who worked with credit union-owned broker-dealer XCU Capital Corp., and Investors Arbitration Specialists, the trust that claims its client, Helen Cohen, suffered losses after an alleged failed real estate investment in September 2005. Cohen died in 2008.
The FINRA panel wrote: “After considering the pleadings, the testimony and evidence presented at the hearing, the panel has decided in full and final resolution of the issues submitted for determination [the] claimants’ claims are denied in their entirety, [and] claimants’ motion for sanctions is denied.” The panel also denied a motion by the claimants to make a referral of SECU Brokerage to FINRA regulation and a request for punitive damages.
According to Cohen’s trust, she allegedly lost $700,000 through a failed real estate investment, and the trustee filed a claim in 2009 to recover that amount plus $2.6 million in damages. An investment adviser with XCU Capital suggested Cohen buy a real estate investment with a company that owned a Florida apartment complex.
“We wanted to do the right thing,” said Bill Umphlett, senior vice president for financial advisory services at SECU and president of SECU Brokerage. “We were the corporate successor in the trail of liability. SECU Brokerage was named because we bought XCU Capital. SECU Brokerage didn’t exist in 2005 when the claim was named.”
In a statement, Arthur Leider, president of IAS, said, “The arbitrators’ decision in this matter was outrageous and puzzling. The panel ignored the facts and the law. The decision is a clear example of why investors should be allowed the option of bringing an action in court rather than being compelled into FINRA arbitration.”
The $21 billion State Employees’ Credit Union in North Carolina acquired XCU Capital’s corporate brokerage shell in January 2008 after all accounts had been transferred to LPL Financial, which bought the San Diego-based broker-dealer in September 2007. The brokerage charter was moved to North Carolina and renamed SECU Brokerage Services in May 2008. According to an October 2010 notice to FINRA, SECU Brokerage and XCU Capital dismissed their third-party claim against LPL Financial in the Cohen case.