On July 6, 2021, a federal district court in Connecticut entered final judgments against investment adviser Westport Capital Markets, LLC and its sole owner, Christopher E. McClure. The judgments order that Westport Capital and McClure are jointly and severally liable for disgorgement of $632,954, along with $187,807 in prejudgment interest, for a total disgorgement and prejudgment interest amount of $820,761. In addition, Westport is ordered to pay a civil penalty of $500,000, and McClure is ordered to pay a civil penalty of $200,000.
The judgments follow a March 16, 2020 jury verdict finding that Westport Capital and McClure defrauded their advisory clients by repeatedly purchasing securities that generated significant undisclosed compensation, thereby enriching themselves at their clients’ expense. The jury found that defendants acted intentionally, knowingly, or recklessly under Section 206(1) of the Investment Advisers Act, and that defendants willfully violated Section 207 of the Advisers Act. The court previously granted the SEC partial summary judgment, holding that, in violation of Sections 206(2) and 206(3) of the Advisers Act, Westport Capital and McClure acted at least negligently in failing to disclose these conflicts of interest.
FINRA arbitration is a dispute resolution process administered by the Financial Industry Regulatory Authority (FINRA). It provides a forum for resolving monetary disputes between investors and securities firms or brokers without going to court. The process is generally faster and less formal than traditional litigation, and decisions are made by a panel of arbitrators who are knowledgeable in securities law and industry practices. Arbitration through FINRA is binding, meaning the decision is final and enforceable in court. This process is commonly used for disputes involving investment losses, unsuitable recommendations, or misrepresentation. Investors must agree to arbitration in their brokerage agreements, often as a condition of opening an account. While arbitration can be a more efficient way to resolve disputes, it also has limitations, such as limited appeal options and potentially high costs. Despite these challenges, FINRA arbitration remains a crucial mechanism for investor protection and dispute resolution in the securities industry.