Anthony Schultz, a thirteen year employee of CISCO Systems, Inc. (Nasdaq: CSCO – news) filed an arbitration with the National Association of Securities Dealers against Salomon Smith Barney, Inc, a unit of Citgroup, Inc. (NYSE: C – news) alleging that his broker failed to inform him of the availability of hedging strategies to protect his concentrated CISCO position against a significant decrease in price. Mr. Schultz acquired more than 128,000 shares of CISCO through employee stock option grants and was directed by his employer to open a Salomon Smith Barney, Inc. account to exercise his CISCO options and manage the portfolio. An inexperienced investor, Mr. Schultz was never advised how hedging strategies could protect his life’s work.
Mr. Schultz told his broker that he was retiring and going to travel for one year. The price of CISCO collapsed and Mr. Schultz lost several million dollars which represented substantially all of his net worth and must now return to work.
Mr. Schultz is represented by a Beverly Hills and Indian Wells, California law firm that represents customers in securities arbitrations.
The firm represents a number of investors who have suffered losses at full service brokerage firms who did not properly advise customers how to manage concentrated positions in their company’s stock.
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.