PHILADELPHIA and NEW YORK, Oct. 23 /PRNewswire/ -- In what appears to be the single largest number of New Jersey based-claimants in a securities related arbitration, a Philadelphia FINRA panel ordered Comprehensive Asset Management of Parsippany, New Jersey to pay 11 investors $125,000 on losses caused by the recommendation, sale and investing of annuities. Annuities, which are one of the highest commission based products a broker can sell, are the subject of numerous regulatory alerts and concerns, including the broker's inability to accurately present the investment and its high costs, which was the case here.
After a seven day hearing spanning over five months, the arbitrators determined that Comprehensive failed to adhere to proper hiring principles and then failed to supervise its "registered investment advisor", who as an agent and registered representative of the firm was thus still subject to industry standards. The Panel did not give credence to the firm's argument that the broker was an "independent contractor".
All of the claimants were serviced by Ed Sadowski, who as the subject of previous NASD arbitration and NASD Enforcement disciplinary actions, has been put out of the investment business - just not soon enough for the investors.
Sadowski switched or churned his clients' annuities from one insurance company to another, generating commission to him and his firms, while causing surrender fees and penalties to be incurred to his clients. Annuities are like IRAs, in that they may have investment choices, called sub-account allocations. Sadowski, while employed by and with the knowledge of Comprehensive, placed the claimants in just one sub-account - a highly speculative global technology fund, which caused immediate and irreparable damage.
Diversification holds that an investor can reduce portfolio risk simply by holding investments which are not perfectly correlated, such as bonds versus stocks - "Do Not Put All Your Eggs In One Basket".
The arbitration award, which becomes final November 19, 2007, also required the firm to cover costs relating to the arbitration. The broker was also employed by Multi-Financial and First Montauk who resolved their differences with the claimants in an undisclosed settlement.
Disputes between investors and brokers, even where the broker acted as an "investment advisor", registered or not, or where the investment is an annuity, are often required to be resolved through mandatory arbitration before the Financial Industry Regulatory Authority (FINRA), which is the largest non-governmental regulator for all securities firms doing business in the United States. It was created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange (NYSE).
The claimants were represented by Richard DeVita, Esq. who as a member of PIABA represents aggrieved investors nationally versus brokers, broker- dealers, and registered investment advisors in all facets of civil litigation and arbitration. DeVita & Associates can be reached at 1228 Garden Street, Hoboken, New Jersey 07030; 201-714-7623 or rddevita@optonline.net.
DeVita & Associates
