An arbitration panel for the Financial Industry Regulatory Authority (“FINRA”) awarded two retired schoolteachers a combined $2.38 million in an arbitration based on the teachers’ claims of excessive trading, unauthorized transfers and withdrawals, and fraud in their Capitol Securities Management accounts.
According to the Award, Claimant Beryl Patin is a retired schoolteacher and in her mid-80s. Claimant Jain Lakin is also a retired schoolteacher. Ms. Patin’s nephew was her registered representative at Capitol and she had a personal relationship with him and his immediate family and a special trust and confidence in him (he is identified only as “Mr. T” in the Award). Ms. Lakin met the nephew through Ms. Patin and also opened an account with him at Capitol.
Over a course of years, the Capitol representative traded aggressively in the accounts, with much short-term trading as well as transfers in and out of the account. The account was turned over at a rate of 13%, necessitating a return on equity of approximately 20% just to break even. The representative, Mr. T, also made several dozen withdrawals from Ms. Lakin’s account, with many going to several accounts he had fraudulently established at Fidelity. He engaged in a pattern of fraudulently selling securities to both claimants in order to illegally transfer cash into their accounts.
When Capitol fired the representative in 2018, he mailed letters to each claimant, confessing to years of theft from their accounts and others’; he then killed himself. His confession states that when he began the phony transfers he was trying to make up losses in a customer’s account but lost more and continued to lose even more from other accounts as his losses and risky trading mounted. He estimated this his customers’ losses totaled in excess of $1.5 million.
The arbitrators found Capitol liable because of the actions of its agent, under its direct supervision, who stole funds from Capitol accounts of Capitol customers during the course of his employment with Capitol. The panel also found that Capitol and “found and papered over previous unauthorized transfers” and “was on notice that [the agent] would do things with the accounts that he should not.”
As a result, the panel awarded the claimants a combined $1,762,985 in compensatory damages, $587,074 in attorneys’ fees, and $30,600 for costs associated with the arbitration.
If you or someone you know lost money as a client of Capitol Securities Management, Inc. of Glen Allen, Virginia due to unsuitable, misrepresented, or unauthorized transactions, please call the Frankowski Firm at 888.741.7503 or fill out this contact form.