Korff v. The Investment Center, Inc., FINRA Dispute Resolution No. 11-02856

Defense verdict in FINRA arbitration.

The respondents were represented by Denis Dice and Joel Wertman of Marshall Dennehey Warner Coleman & Goggin in a claim where the claimant sought damages for an alleged unsuitable recommendation of a variable annuity for the claimant's IRA and also $672,000 of lost profit damages. The claimant alleged that the $1.1 million annuity was unsuitable because it was an overconcentration of a variable annuity relative to the claimant's liquid net worth; the claimant did not understand nor want the annuity; the commission was undisclosed to the claimant; and the mutual fund subaccounts were not suitably invested since they were not invested in equity mutual fund subaccounts during the time frame of 2009 through 2010. The claimant alleged that if the mutual fund subaccounts had been properly invested in the market, he would have had profits of an additional $672,000.

However, the FINRA hearing panel determined that the variable annuity was suitable to the claimant since it provided him with the guaranteed income that he required in retirement and that the claimant understood the features and benefits of the annuity through multiple disclosures to the claimant. Furthermore, the panel also determined that the claimant was not entitled to lost profits as a measure of damages. At arbitration, the claimant was unable to articulate when, in fact, he should have been invested in the market and what investments should have been purchased in the variable annuity to fully participate in the market recovery between 2009 and 2011.

Case Law Alerts - 2nd Quarter 2013