This arbitration arises out of a Santander stockbroker’s recommendation that a retired couple invest their life savings, $500,000 in Westernbank preferred stock. The clients had never made any stock market investments before they met the Santander stockbroker and the Westernbank preferred stock was the only investment in their accounts.
The clients first met the Santander stockbroker when he cold-walked into the clients’ family owned sporting goods store. The clients were in their 70’s and on the verge of retirement after running their small business for over .
The financial advisor introduced himself as a broker working at R-G Investments and solicited the clients to purchase Westernbank preferred stock. He presented himself as an expert on bank stocks and pitched the Westernbank preferred stock as a safe investment; one that was ideal for retirees. Having no prior investment experience at all, the clients believed the advisor and transferred their life savings, $500,000 to purchase Westernbank preferred stock.
Shortly after the clients’ account transferred from R-G Investments to Santander, they contacted the broker about a decline in the value of their accounts, which was down approximately 10%. They asked about selling the Westernbank stock as they couldn’t risk losing any of their retirement savings. The Santander advisor told them to hold the stocks, that the decline was temporary and the investments insured.
Eventually, W Holding Company suspended dividend distributions on Westernbank preferred stock. When the clients asked the Santander broker about the monthly distribution he never received, the stockbroker again told them not to worry and that the investments are insured.
One year later, the Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico closed Westernbank and appointed the Federal Deposit Insurance Company (FDIC) as receiver. The Santander stockbroker continued to tell the clients that their investments were insured and that the FDIC would make sure they were repaid their investment.
On August 2, 2011, the FDIC determined that insufficient assets existed to make any distribution on lower priority claims – meaning stockholders would recover nothing. The clients’ investments in the Westernbank preferred stock were not insured.
The last time the clients spoke with the Santander broker, he said the money was lost and there was nothing they could do to get it back. The clients lost their entire investment in Westernbank preferred stock. The value of the investment in their accounts is near worthless. Currently, the Clients’ only source of income is social security and a small pension payment.
The Santander stockbroker’s recommendations violated FINRA’s Conduct Rule 2111 (f/k/a 2310) governing suitability. The recommendation that the clients invest in a single stock was unsuitable, as was the broker’s recommendations to hold the Westernbank preferred stock.
The Santander stockbroker continuously made misleading statements to get the clients to hold the stock while it declined in value to nearly zero. He knew the Westernbank preferred stock was not insured and intentionally misled the clients. The broker’s actions were in violation of FINRA Rules of Conduct 2110 and 2120 which relate to standards of commercial honor and trade principles and the use of manipulation, deception, or fraud, respectively.
Santander is responsible for its own wrongs and is liable for its stockbroker’s recommendation that the clients hold an overly concentrated portfolio of Westernbank preferred stock, for failing to supervise him, and for his fraudulent concealment of facts about the risk of the clients’ investment in a single bank stock. Had Santander and its stockbroker recommended a diversified investment strategy and not concealed the truth from the clients, they would not have been so severely damaged.
For dedicated representation by a law firm with over of experience in all kinds of investment related disputes, a firm that knows how to handle these Puerto Rico preferred stock cases, contact us by telephone at 561-338-0037 or toll free at 800-732-2889 or via e-mail. We may also be able to arrange a meeting with you at offices located in San Juan, Puerto Rico or in Boca Raton, Florida.