James Fayssoux Sr. is still working at 75 rather than enjoying retirement because he lost a substantial amount of money when a brokerage firm churned his portfolio.
Fayssoux, a real estate lawyer in Greenville, South Carolina, may be on his way to financial recovery following a decision last week by Finra arbitrators, who held SW (Salomon Whitney) Financial liable for excessive, unsuitable and unauthorized trading of stock on margin in his accounts.
The unanimous three-person Financial Industry Regulatory Authority Inc. panel ordered the firm to pay $3.2 million, according to the Aug. 30 award. The total recovery is made up of $1.4 million in compensatory damages, $500,000 in punitive damages, $975,171 in returned commissions and fees, $297,208 in attorneys’ fees, $7602 in costs and $400 in arbitration fees.
In his statement of claim filed on May 31, 2022, Fayssoux said the SW Financial registered representative with whom he worked, Peter Girgis, engaged in churning in high-risk stocks. Fayssoux alleged Girgis failed to do reasonable due diligence on the unsuitable investments and did not disclose the risks of the stocks or the strategy.
Between December 2019 and April 2022, Fayssoux claims he incurred trading losses of $1.06 million and commissions and other fees of $975,171, and paid margin interest of $213,659. Fayssoux’s account had an annual turnover rate of more than 21, said his attorney, Kalju Nekvasil. There’s a presumption of fraud with a turnover rate of 4 or higher.
“It’s the most extreme churning I’ve seen in more than 40 years of practicing law,” said Nekvasil, owner of the law firm Goodman & Nekvasil.
Girgis was based in New York City and first contacted Fayssoux through a cold call. The experience has been traumatic for Fayssoux, Nekvasil said. But the arbitrators’ decision provides some comfort.
“The case caused my client significant emotional distress, and I believe this award will help him move on with his life,” Nekvasil said. “We’re particularly happy the [arbitration] panel was willing to award punitive damages.”
The challenge is now to collect the money.
Finra expelled SW Financial in May. Girgis, who wracked up 15 regulatory disclosures while working for eight firms over 19 years in the financial industry, is no longer registered as a broker. He left SW Financial last September, according to his BrokerCheck record.
The firm had two different lawyers representing it during the Finra arbitration process, Charles O’Rourke from August to September last year, and Michael C. Farkas from last September until July.
SW Financial failed to appear at arbitration hearings when Farkas stopped representing the firm, according to the award document. Farkas declined to comment.
Nekvasil is going to take SW Financial’s former insurance carrier to court to make it pay the arbitration award. He said he likely will get a declaratory judgment.
“We’re very confident we’re going to win,” Nekvasil said.
SW Financial was Girgis’ last stop in the industry. Four of the last five firms for which he worked were expelled from the industry by Finra.
Financial Advisor IQ first reported on Fayssoux’s arbitration award.