Panel awards $3.8m to ‘mom and pop’ investors whose risky investments tanked

In a victory for everyday investors, arbitrators have awarded $3.8m to 13 Florida seniors who claimed a financial adviser squandered their retirement money by plowing it into risky investments.The award comes after the Guardian highlighted these investors’ losses as part of an investigation into dangers that so-called “mom and pop” investors face at a time when the Trump administration has thrown its support behind Wall Street’s efforts to sell them more higher-risk “alternative investments”.Many of the investors claimed they had lost most of their life savings after the adviser put them into “structured products” – a risky combination of bonds and derivatives that regulators have flagged as requiring “heightened supervision” by brokerage firms.An arbitration panel with the Financial Industry Regulatory Authority (Finra) ruled last week that three financial firms – Charles Schwab & Co, TD Ameritrade Clearing Inc, and TD Ameritrade Inc – should compensate the Florida investors, who had alleged that Schwab had failed to properly supervise the adviser.The adviser, Mario Payne, used Schwab and Ameritrade – which Schwab purchased in 2020 – to execute his trades. Payne was not named as a defendant, but the investors alleged misconduct by him in their claim.The $3.8m award came in the face of long odds for those who challenge financial firms at Finra arbitration. Last year, the public won only 28% of their cases against Wall Street firms.“Awards of this size and nature against major national brokerage are rare indeed,” said Robert Banks, a veteran securities lawyer who represents investors who sue financial firms.Payne did not respond to requests for comment about the award against Schwab or to previous requests from the Guardian for comment.A Schwab spokesman said in an emailed statement: “We empathize with these investors, but the decision was legally wrong. All investment choices were made by the claimants and their independent financial advisor and not Schwab, whose sole role was as a custodian of the accounts.”Last month’s Guardian report described an accelerating push by Wall Street, lawmakers and the Trump administration to make it easier for mom and pop investors to purchase so-called “alternative investments”, which include an array of risky products that don’t fall into the plain vanilla categories of stocks, bonds or money market funds.In August, Donald Trump issued an executive order that promised his administration will smooth the path so that Americans can purchase so-called “alts” for their 401(k)s. Trump’s order also seeks to make it harder for investors to sue for wrongdoing by the players who control 401(k) plans, which the order claimed has made it harder for Americans to achieve “the competitive returns and asset diversification necessary to secure a dignified, comfortable retirement”.Michael Bixby, ea Florida lawyer who represented the investors who won the case against Schwab, said the arbitrators gave a “full award” that reflected how much the investors would have had if their money had been in a balanced portfolio of stocks and bonds, instead of in structured products.Other Bixby clients lost two previous arbitrations against Schwab relating to Payne. In its answer to the claim they recently lost, Schwab said that it played no role in selecting or overseeing the securities Payne recommended, and noted that he used the firm’s trading platform but was not supervised by Schwab.Payne is no longer associated with Schwab. His regulatory records indicate he is currently the chief compliance officer for the investment advisory firm he owns.The investors who won the case were cautiously optimistic about the news. The Schwab spokesperson declined to comment when asked if the firm planned to file a motion to vacate or modify the arbitrators’ award.Cathy Shubert, a former Payne client whose story was featured in the Guardian’s investigation, was awarded $139,650 by the arbitrators. She said she won’t celebrate until she sees her check.“I worked for 40 years and it was not easy for me to make the money I gave him,” she told the Guardian. Getting the money “will certainly take the burden off me”.Like several of the investors, Sonja Mattingley, a 65-year-old traveling nurse who lives in Florida, has taken on more work because of her depleted portfolio. She said her plan had been to begin to work less by now, “but that was scuttled” by her losses with Payne.Mattingley was awarded nearly $95,000. When reached to get her reaction to the arbitrators’ ruling Mattingley was in the middle of a 90-minute drive to Jacksonville, where she had a second nursing job.