FINRA Arbitration: What To Expect And Why You Should Choose Our Law Firm

If you are reading this article, you are probably an investor who has lost a substantial amount of money, Googled “Securities Arbitration Attorney,” clicked on a number of attorney websites, and maybe even spoken with a so-called “Securities Arbitration Lawyer” who told you after a five minute telephone call that “you have a great case;” “you need to sign a retainer agreement on a ‘contingency fee’ basis;” and “you need to act now because the statute of limitations is going to run.” You may want to ask yourself whether that attorney is as bad as the stockbrokers you were concerned about in the first place. Some attorneys will rush you to hire them before you speak to anyone else and not tell you about the clause in their contract that allows them to drop you as a client later on if they cannot get a quick settlement. They will solicit you without a real case evaluation and/or without any explanation of Financial Industry Regulatory Authority (“FINRA”) proceedings. The scenario above is not the way for attorneys to properly serve clients, and it is not the way we do business at The Law Offices of Robert Wayne Pearce, P.A. If you are planning on speaking or meeting with us or any other attorney, let us introduce you to the FINRA arbitration proceeding by giving you some information in advance to help you understand the different stages of FINRA arbitration, what you should expect from skilled and experienced FINRA securities arbitration lawyers, and what you should expect to personally do in order to have the best outcome: 1. CASE REVIEW Before we accept any case, our attorneys conduct a thorough interview of you to understand: the nature of your relationship with your broker; the level of your financial sophistication; the representations or promises made to you in connection with any investment recommendation; and your personal investment experience, investment objectives, and financial condition at the time of any recommendation or relevant time period. We will review your account records, including, but not limited to: account statements; confirmations; new account opening documents; contracts; correspondence; emails; presentations; and marketing materials that you may have received in connection with your accounts and the investments made therein, etc. Investors rarely contact our office without knowing whether they have suffered investment losses, but sometimes that occurs because the particular investor does not have all their records and/or is unsophisticated, inexperienced, and unable to decipher the account records they retained. If you retained your account statements and provide them, we should be able to at least estimate (under the different measures of damages) the amount you may be able to recover if you win your arbitration proceeding. If you do not have those records, we will help you retrieve them without any obligation so that all of us are fully aware of the amount we may possibly recover for you if we are successful in arbitration. In addition, we will spend the time necessary to get to know you and the facts of your dispute to have a good chance of success in proving your case. After all, it does not benefit either you or our law firm to file an arbitration claim that, months or years later, we discover has little chance of success. Ultimately, we want to know, and so should you, whether or not you have a claim with merit and are likely to recover damages if we go through a full arbitration proceeding. The fact is Attorney Pearce does not take cases unless he and his team believe you suffered an injustice and are likely to succeed at the final arbitration hearing. 2. THE STATEMENT OF CLAIM Many of these young and/or inexperienced attorneys with flashy websites and Google Ad Word advertisements (to get them to the top of the page) are more interested in marketing and signing up cases to settle early than they are in going all the way and winning your case at a final arbitration hearing for a just result. Oftentimes, they will insert your name in a form pleading, one that they use in every case, which states little more than if you (the “Claimant”) were an investor with brokerage firm ABC and stockbroker XYZ (the “Respondent(s)”) made misrepresentations, failed to disclose facts, made unsuitable recommendations, and violated laws 123, you are entitled to damages. They are unwilling and/or fail to take the time necessary to study the strengths and weaknesses of your case and write a detailed Statement of Claim (also referred to as the “Complaint”) with all of the relevant facts necessary to inform the arbitrators what happened and why you are entitled to recover your damages. That is not the way Attorney Pearce, with over 40 years of experience with investment disputes, files a Statement of Claim, the first and sometimes the only document that the arbitrators will read before the final arbitration hearing. 3. THE ANSWER After we file the Statement of Claim and it is served, the brokerage firm and/or stockbroker will have forty-five (45) days to file the Answer to your allegations. Oftentimes, the Respondent(s) will ask for an extension of time to file the Answer and we will give it to them provided no other deadline is extended, particularly the deadlines associated with the selection of arbitrators and scheduling of the initial pre-hearing conference, where all of the other important deadlines and dates of the final arbitration hearing are scheduled. Some clients have asked why would you give them extra time to file their best Answer? Well, we believe after 40 years of doing these FINRA arbitrations, that it is better to know the story they intend to tell the arbitrators early on and lock them in so we can come up with the best strategy and all the case law necessary to overcome their best defenses and win your arbitration. In other words, we would rather know about the defense early on than be surprised at the final hearing. Besides, Respondent(s) can always try to file...

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The Law Offices of Robert Wayne Pearce, P.A. Wins $6 Million Plus Award Against UBS and UBS Puerto Rico

In an arbitration proceeding against UBS Financial Services, Inc. (UBS) and UBS Financial Services, Inc. of Puerto Rico (UBS-PR), the Law Offices of Robert Wayne Pearce, P.A. won $4.25 million in compensatory damages plus interest at 6.25% from February 28, 2014 and costs of $170,000 for one of the firm’s clients last month. A summary of our clients’ allegations against UBS and UBS-PR are set forth below. If you or any family member received similar unsuitable recommendations from UBS-PR and its stockbrokers, or found yourself with an account overconcentrated in Puerto Rico municipal bonds and/or closed-end bond funds, or if you borrowed monies from UBS and used your investments as loan collateral, we may be able to help you recover your losses. Contact our office as soon as possible for a free consultation about your case. Time is of the essence! INTRODUCTION This arbitration arose out of a series of unsuitable recommendations by a UBS-PR and UBS financial advisor that our clients purchase and then hold an excessive concentration of Puerto Rico Bonds and UBS-PR Closed-End Funds. As a result, our clients’ investment portfolios were not diversified from not only an asset allocation standpoint but also overly concentrated in securities from a single geographic area – Puerto Rico. The excessive concentration in Puerto Rico securities and leverage strategy implemented made the accounts highly speculative, which was inconsistent with not only our clients’ investment objectives but also the UBS-PR and UBS financial advisor’s representations. UBS and UBS-PR, through their representatives, disseminated false and misleading information to our clients about the nature, mechanics and risks of owning leveraged and concentrated positions in Puerto Rico Bonds and UBS-PR Closed-End Funds and the investment strategy employed in their accounts. In so doing, the UBS, UBS-PR, and their representatives not only violated the Puerto Rico Uniform Securities Act (“PRUSA”), but also committed fraud, breached their fiduciary duties to our clients, breached their contracts and the FINRA Code of Conduct, and were negligent in advising our clients on how to safeguard their investment capital. UBS-PR and UBS negligently failed to supervise its employees in connection with the management of our clients’ accounts. As a result, our clients suffered substantial damages. BACKGROUND Our clients (the Claimants), a husband and wife, were both retired individuals, 61 and 53 years of age. They have been married for 26 years with three children. Our client owned and operated a 100 year old family business until he sold the business and retired. The profit from that sale was the source of their retirement savings and entrusted to their UBS-PR and UBS registered financial advisors to preserve their capital and generate income to support them during their retirement. During the relevant period, our client and his family maintained at least seven UBS-PR accounts, including, individual, joint, corporate and a trust account for the benefit of him and/or his family. Claimants’ uniform instruction to their stockbroker was to invest in “inversiones seguras” or “safe investments” in their UBS-PR accounts and generate the income the family needed to support their lifestyle. Claimants relied primarily upon their stockbroker for investment advice and management of all of the investments in their UBS-PR accounts in accordance with their instructions. However, on at least two occasions, our client met with the Chairman of the Board and Chief Executive Officer of UBS-PR and of its Puerto Rico affiliate companies and also Chairman of the Board of each of the 23 UBS-PR Closed-End Funds, and discussed the Puerto Rico Bonds and UBS-PR Closed-End Bond Funds in his family’s accounts. Unfortunately, all of the UBS-PR representatives misrepresented the risks of the investments and investment strategy implemented in our clients’ accounts. Our clients were told by their stockbroker that the investments in their accounts were “conservadoras,” (i.e., “conservative”). The UBS-PR representatives told Claimants that the Puerto Rico General Obligation bonds (“GO Bonds”) and Sales Tax and Financing Authority bonds (“Cofina Bonds”) were “garantantizados,” (i.e., “guaranteed”) to be paid by the Commonwealth of Puerto Rico (the “Commonwealth”). The Cofina Bonds were described as “el estándar de oro” and “blindados,” (i.e., “the gold standard” and “bulletproof”). The stockbroker had also purchased what were described to Claimants as “fondos mutuos conservadores, seguros, y de bajo riesgo,” (i.e., “safe, low risk, and conservative mutual funds”). The stockbroker also told Claimants that the bonds in the so-called “fondos mutuos” were either backed by the U.S. government or “garantantizados por Puerto Rico,” (i.e., “guaranteed by Puerto Rico,”) which was false and/or misleading. The UBS-PR representative told our client the so-called “fondos mutuos” were so safe that he had his aunts fully invested in them. But, the so-called “fondos mutuos” were not really typical mutual funds; they were leveraged, illiquid closed-end bond funds concentrated in a single geographic area (Puerto Rico) and suitable for only the most aggressive bond investors. Over the years, the stockbroker offered financing opportunities to our client. He offered lines of credit at interest rates lower than banks whenever our clients needed to make large withdrawals for purchases. According to the stockbroker, our clients would profit from the difference in the high interest paid on the bonds by the government and the low interest charged on their variable line of credit through UBS Bank (USA) that was collateralized with the pledged shares of the UBS-PR Closed-End funds in their UBS-PR accounts. He assured them that the strategy was safe and used all of the time by banks to make money when interest rates were low. The only risk the stockbroker mentioned was that they would need to stop using the strategy if and when interest rates rose in the future. There was no discussion about the risk of leverage or what could happen in the account if the bond and funds prices declined. Our clients let the stockbroker manage their accounts and periodically received verbal reports from him that all was well. He never expressed any concerns about economic or political issues developing within the Commonwealth, not even after our clients approached him in September and October...

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The Law Offices of Robert Wayne Pearce, P.A. Wins $1.45 Million Plus Interest Award Against UBS and UBS Puerto Rico

In an arbitration proceeding against UBS Financial Services, Inc. (UBS) and UBS Financial Services, Inc. of Puerto Rico (UBS-PR), the Law Offices of Robert Wayne Pearce, P. A. won a $1.45 million plus interest award for one of the firm’s clients last week. A summary of Claimant’s allegations against UBS and UBS-PR are set forth below. If you or any family member received similar unsuitable recommendations from UBS-PR and its stockbrokers or found yourself with an account overconcentrated in Puerto Rico municipal bonds and/or closed-end bond funds, or if you borrowed monies from UBS and used your investments as collateral for those loans, we may be able to help you recover your losses. Contact our office for a free consultation about your case. SUMMARY OF ALLEGATIONS MADE AGAINST UBS AND UBS-PR The arbitration arose out of a series of unsuitable investment recommendations made by a UBS-PR and a UBS financial advisor that our client purchase and hold an excessive concentration of UBS-PR closed-end bond funds in a leveraged UBS-PR account. Because of the financial advisors’ unsuitable recommendations, our client’s investment was not diversified from an asset allocation standpoint and also from a concentration standpoint, as the portfolio was overconcentrated in a single geographic area, namely, Puerto Rico. UBS and UBS-PR, through their representatives, disseminated false and misleading information to our client about both the nature and risk of owning the closed-end bond fund and the leveraged investment strategy employing UBS and UBS-PR financing schemes through UBS Bank. UBS, UBS-PR and its employees not only violated the FINRA Code of Conduct, but they also committed fraud, breached their fiduciary duties to our client, and were negligent in advising her on how to safeguard her investment capital. Both UBS and UBS-PR also negligently failed to supervise its employees in connection with managing our client’s account. Our client suffered substantial damages. THE RELEVANT FACTS Claimant was a 45 year old married housewife raising two children in San Juan, Puerto Rico. She had very little investment experience and a very small account. Claimant relied exclusively upon her UBS financial advisor for investment advice and management of the investments in her UBS-PR account. Claimant met with her stockbroker to discuss her goals and financial needs and receive recommendations for the investment of the gift she received from her father. She told her stockbroker that she only wanted him to invest in safe income producing investments in her UBS-PR account. Claimant told her stockbroker that she wanted investments that would be guaranteed (i.e., preserve her principal) and produce income. Her UBS financial advisor acknowledged her goals and needs and recommended what he described as seguros, de bajo riesgo y fondos mutuos conservadores, i.e., safe, low risk, and conservative mutual funds. He told her that the bonds in the so-called fondos mutuos, i.e., mutual funds were estan garantizados por la constitución de Puerto Rico, i.e., they are guaranteed by the Puerto Rico constitution. There was no detailed discussion about the nature, mechanics or risks of the proposed investments in the UBS Puerto Rico closed-end funds that he recommended. Neither UBS‑PR nor the UBS financial advisor ever provided Claimant with a prospectus or offering memorandum relating to the closed-end funds. Contrary to the stockbroker’s representations, these were very speculative investments due to the excessive concentration in Puerto Rico bonds, illiquidity and leverage employed by the managers of the so-called conservative mutual funds. Claimant followed her financial advisor’s advice and allowed them to purchase over $4 million of UBS-PR closed-end funds. Shortly after the UBS financial advisor purchased the so-called conservative mutual funds in Claimants account, she decided to purchase a new residence. Claimant told her stockbroker that she would need to raise approximately $1.2 million in cash to purchase the new home. The stockbroker told her that he could arrange for special financing through either a line of credit or what he described as a repo transaction. Claimant followed her UBS financial advisors recommendation and agreed to open a line of credit and then enter into the repo transaction. Approximately two years later, Claimant told her stockbroker that her husband needed to pay off a business loan. The UBS stockbroker recommended she use her line of credit through UBS-PRs bank affiliate, UBS Bank (USA). He told her that the so-called conservative mutual funds in her account would be collateral for the credit line. There was no discussion about the risk of pledging those investments as collateral for the loan. There was no mention of margin calls. He said nothing about the risk of leveraging already leveraged investments in Puerto Rico bonds through the so-called conservative mutual funds. As always, Claimant followed her stockbroker’s recommendation and borrowed approximately $450,000 to help her husband pay off his business loan. In or about June 2011, Claimant told her UBS financial advisor that she wanted to purchase an apartment and needed approximately $840,000. He reminded Claimant that she had a line of credit for that purpose and that she should use her credit line because the interest rate was so low. Once again, there was no discussion about the risk of pledging her investments as collateral for the additional loan. There was no mention of margin calls or forced liquidations without any prior notice. Once again, the UBS financial advisor said nothing about the risk of leveraging already leveraged investments in Puerto Rico bonds through the so-called conservative mutual funds. As always, Claimant followed her stockbroker’s recommendation and withdrew an additional $840,000 to purchase the apartment. Claimant and her UBS financial advisor rarely met and discussed her investments in her UBS-PR account. On occasion, the financial advisor telephoned or sent by mail some investment recommendations and she did whatever he advised her to do. Claimant did not become concerned about any of the activity in her account until the Spring of 2013. At that time, her accountant reported a decline in the value of the investments she owned. The accountant had prepared financial statements for her family and noticed the value of the investments...

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The Law Offices of Robert Wayne Pearce, P.A. Wins $600,000 Plus Interest Award Against UBS Puerto Rico

In an arbitration proceeding against UBS Financial Services, Inc. of Puerto Rico (UBS-PR), the Law Offices of Robert Wayne Pearce, P. A. won a $600,000 plus interest award for one of the firm’s clients. A summary of Claimant’s allegations against UBS-PR are set forth below. If you or any family member received similar unsuitable recommendations from UBS-PR and its stockbrokers or found yourself with an account overconcentrated in Puerto Rico municipal bonds and/or closed-end bond funds, or if you borrowed monies from UBS and used your investments as collateral for those loans, we may be able to help you recover your losses. Contact our office for a free consultation about your case. SUMMARY OF ALLEGATIONS MADE AGAINST UBS-PR The arbitration arose out of a series of misrepresentations and unsuitable recommendations by a UBS-PR financial advisor to Claimant that he purchase and then hold an excessive concentration of UBS-PR closed-end bond funds in his account. The Respondent through its representatives made false representations and misleading statements to Claimant about both the nature and risk of the closed-end bond fund and the investment strategy. As a result, the Claimant’s investment portfolio was not diversified from not only an asset allocation standpoint but also overly concentrated in securities issued in a single geographic area, i.e., Puerto Rico. The Respondent and its representatives not only violated the FINRA Code of Conduct and Puerto Rico securities laws but they also committed fraud, breached their fiduciary duties to Claimant and were negligent in advising him. UBS-PR also negligently failed to supervise its employees. The Respondent and its representatives’ misconduct caused the Claimant to suffer substantial damages in an amount to be determined at the final arbitration hearing. THE RELEVANT FACTS Claimant is 73 years old and living alone in San Juan, Puerto Rico. He retired from the Veterans Administration pharmacy department. Thereafter, he went back to work part-time as a Pharmacist to supplement his income. He has worked as a Pharmacist for over 40 years. He currently supports himself with his Veterans Administration pension, part-time employment income and dividends from his securities account earned on securities in his account at UBS-PR. The UBS-PR Stockbroker has been Claimant’s primary broker at UBS-PR for many years. The stockbroker knows Claimant’s age, employment status, and financial condition. He knew that Claimant’s life savings were deposited with UBS-PR and in his hands. Claimant has been a passive investor and relied exclusively on his UBS-PR Stockbroker to make all of the investment decisions in his UBS-PR account. As a result of the financial advisor’s recommendations and decisions, Claimant’s UBS-PR account became highly concentrated (100%) in Puerto Rico bonds and what the UBS-PR Stockbroker described as “fondos,” i.e., “funds” or “fondos mutuos,” i.e., “mutual funds.” Claimant has never been given a full explanation of the nature, mechanics or risks of only owning Puerto Rico bonds and “funds” in his account. There was little activity in Claimant’s UBS-PR account, other than dividend reinvestments, for many years. However, in August 2012, the UBS-PR Stockbroker solicited Claimant to sell his investment in the Puerto Rico Fixed Income Funds, Inc. and to purchase the Puerto Rico Fixed Income Fund V, Inc. because it would supposedly increase the amount of income Claimant would receive by investing in a different “fund.” Claimant questioned the UBS-PR Stockbroker about the “fund” and whether it was a “safe” investment for him to make at that time. The UBS-PR Stockbroker assured Claimant that it was a “very conservative” and “low risk” investment and just like the other “funds” in his retirement account. In March of 2013, Claimant became concerned about the status of his account. The recent change in the government whereby the Popular Democratic Party took control was especially troublesome to him. He was concerned that the Popular Democratic Party would turn everything into junk, including the bonds in his account. Claimant noticed that the value of his accounts had dropped and set up an appointment to meet with the UBS-PR Stockbroker. Upon arrival, Claimant told the financial advisor he wanted to sell all of his investments in the account because he was very concerned about Puerto Rico’s economic future. The UBS-PR Stockbroker told Claimant, among other things: “te volviste loco,” i.e., “you are crazy;” “no se preocupe, i.e., “not to worry;” “nunca se convertiran en bonos de chatarra, i.e., “they will never become junk bonds;” “no venda,” i.e., “don’t sell;” “esta pagando interes alto,” i.e., “it’s paying high interest;” and “no puede reemplazar el ingreso,” i.e., “you cannot replace this income.” The UBS-PR Stockbroker never said anything about the continuing decline in the ratings of the Puerto Rican bond by the major credit rating agencies, Moody’s, Standard and Poors, and Fitch ratings. He said nothing about the speculative nature of the “funds” due to the illiquidity, leverage and geographic limitations of the investments. He remained silent about the risk of holding an excessive concentration of Puerto Rico securities in the account. As always, Claimant relied on the UBS-PR Stockbroker for investment advice who did exactly what he told him to; that is, he held all of the Puerto Rico bonds and “funds” in his UBS-PR account. In September 2013, Claimant attempted to contact the UBS-PR Stockbroker several times by telephone. However, each and every time Claimant called he was told the financial advisor was unavailable. Claimant was only able to exchange messages about the investments in his account through the UBS-PR Stockbroker’s assistant. His messages were always: Don’t worry, this is temporary, the market will recover, and hold on to all of your bonds and “funds.” Claimant did not meet with the UBS-PR Stockbroker until February 13, 2014 and not until after he sent a letter demanding that the financial advisor sell all of the “funds” in his account. At the meeting, the UBS-PR Stockbroker continued to speak highly of the Puerto Rico bonds and “funds.” He continued to tell Claimant that the decline in the value of the “funds” was not permanent and that the prices of all of the Puerto...

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2013 Most Effective Lawyers Finalist

Daily Business Review Monday, December 9, 2013 ARBITRATION AWARD AGAINST WELLS FARGO RECOVERS MOST OF FAMILY’S LOSSES Mediation and arbitration are supposed to be faster and more cost-effective than going to court. However, it was neither in a case involving the theft of millions of dollars from College Health and Investment L.P., a family-run limited partnership. The case took more than three years to resolve as attorneys for Wachovia Securities, now part of Wells Fargo, used numerous delaying tactics before ultimately paying a $2.75 million arbitration award, said Boca Raton securities attorney Robert W. Pearce, who represented College Health. The case grew out of Wells Fargo’s failure to detect the alleged theft and unauthorized transactions of millions of dollars by Esther Spero, whose aunt, Shari Jakobowitz, was in charge of the partnership’s accounts. Spero was accused of misusing the family’s financial information to steal about $7 million, which she in turn lost to one-time Miami Beach developer Michael Stern, who was supposed to be investing in real estate. Instead, Stern allegedly used the money to pay off his own debts after the real estate crash while funding a lavish lifestyle. Pearce traced most of the money and made recoveries in state court against Stern, a title company, Spero and Wachovia. “They came up a bit short, but we came close to getting most of their money back,” Pearce said. Then, in July, a Financial Industry Regulatory Authority arbitration panel ordered Wells Fargo to pay $2.75 million in damages and interest for failing to detect Spero’s alleged embezzlement. Pearce alleged bank employees went so far as to create a false power of attorney to give Spero control over the account that held most of the assets. Had the bank enforced its own policies and procedures, as well as FINRA’s rules, it would have detected the embezzlement, Pearce argued. “The bank had numerous red flags. It should have made inquiries to stop the movement of funds,” Pearce said.

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Wells Fargo Advisors Ordered to Pay $2.8 Million to Limited Partnership

By Dow Jones Business News, July 09, 2013, 04:07:00 PM EDT By Corrie Driebusch NEW YORK–An arbitration panel has ordered Wells Fargo Advisors to pay $2.8 million to a family limited partnership that accused the firm of negligence in connection with alleged thefts from its investment account. The Miami , Fla.-based partnership had sued a former secretary, accusing her of forging signatures to transfer money out of its accounts, and won a $21 million judgment in a Florida district court in 2010. That suit alleged the secretary, Esther Spero, took the money for her personal use from accounts at Wachovia Securities and elsewhere between 2005 and 2008. Wachovia was later acquired by Wells Fargo & Co. (WFC ). In its separate arbitration claim against Wells Fargo, the partnership, called College Health and Investment Ltd., said the brokerage was negligent in failing to detect the alleged theft. The Financial Industry Regulatory Authority arbitration panel found Wells Fargo to be liable and ordered that it pay $ 2.3 million in damages and prejudgment interest. Wells Fargo also must also pay $419,000 in margin interest and $35,000 in costs. College Health and Investment Ltd. had requested $4.4 million, according to the arbitration panel ruling. As is customary in the FINRA claims system, the written award did not explain the panel’s reasoning. Robert Wayne Pearce, lawyer for the partnership, said it showed the panel agreed with the negligence claim. A Wells Fargo spokesman said in a statement, “We’re disappointed in the panel’s decision and don’t believe it was warranted by the facts presented during the hearing.” Write to Corrie Driebusch at corrie.driebusch@dowjones.com. Dow Jones Newswires 07-09-131607ET Copyright (c) 2013 Dow Jones & Company, Inc.

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Kazma Citigroup Arbitration Award

AWARD FINRA DISPUTE RESOLUTION In the Matter of the Arbitration Between: Names of the Claimants Case Number: 09-02697 Gerald J. Kazma Revocable Trust Amzak Capital Management, LLC Names of the Respondents Hearing Site: Boca Raton, Florida Citigroup Global Markets, Inc. f/k/a Citicorp Investment Services Citigroup Alternative Investments, LLC Nature of the Dispute: Customer vs. Member and Non-Member. REPRESENTATION OF PARTIES For Gerald J. Kazma Revocable Trust (“Kazma”) and Amzak Capital Management, LLC (“ACM”), hereinafter collectively referred to as “Claimants”: Robert Wayne Pearce, Esq., Robert Wayne Pearce, P.A., Boca Raton, Florida. For Citigroup Global Markets, Inc. f/k/a Citicorp Investment Services (“CGM”) and Citigroup Alternative Investments, LLC (“CAI”), hereinafter collectively referred to as “Respondents”: Jason M. Fedo, Esq., Greenberg Traurig, P.A., West Palm Beach, Florida. CASE INFORMATION Statement of Claim filed on or about: May 11, 2009. Claimant Kazma signed the Submission Agreement: May 29, 2009. Claimant ACM signed the Submission Agreement: May 29, 2009. Statement of Answer filed by Respondents on or about: August 5, 2009. Respondent CGM signed the Submission Agreement: June 18, 2009. Respondent CAI signed the Submission Agreement: July 19, 2010. Respondents’ Motion for Remedial Action Based on Claimants’ Spoliation of Evidence (“Motion for Remedial Action”) filed on or about: July 1, 2010. CASE SUMMARY Claimants asserted the following causes of action: 1) breach of fiduciary duty; 2) common law fraud; 3) negligent misrepresentation; 4) negligent management; 5) negligent supervision; and, 6) breach of contract. The causes of action relate to the purchase in Claimants’ accounts of ASTA Three Series 2006‑1 and ASTA Five Series 2007‑1A. Unless specifically admitted in their Answer, Respondents denied the allegations made in the Statement of Claim and asserted various affirmative defenses. RELIEF REQUESTED Claimants requested: 1) compensatory damages in excess of $4,000,000,00; 2) interest at the legal rate; 3) costs of this proceeding; 4) punitive damages; and, 5) such other relief as the undersigned arbitrators (the “Panel”) deemed just and proper. Respondents requested that the Statement of Claim be dismissed, with prejudice, and that the costs associated with this arbitration be assessed against Claimants. OTHER ISSUES CONSIDERED AND DECIDED The arbitrators acknowledge that they have read the pleadings and other materials filed by the parties. During the evidentiary hearing, the Panel heard argument on Respondents’ Motion for Remedial Action. The Panel denied the motion. During the evidentiary hearing and at the close of Claimants’ case-in-chief, Respondents moved to dismiss the Statement of Claim on the grounds that Claimants failed to prove their case. Claimants opposed the motion. Following the argument of counsel, the Panel denied the motion. The parties have agreed that the Award in this matter may be executed in coun1hrpart copies or that a handwritten, signed Award may be entered. AWARD After considering the pleadings, the testimony and evidence presented at the hearing, the Panel has decided in full and final resolution of the issues submitted for determination as follows: Respondents are liable, jointly and severally, for negligent management and negligent supervision and shall pay to Claimant Kazma compensatory damages in the sum of $908,648.00, pre-judgment interest specifically denied. Respondents are liable, jointly and severally, for negligent management and negligent supervision and shall pay to Claimant ACM compensatory damages in the sum of $908,648,00, pre-judgment interest specifically denied. Any and all claims for relief not specifically addressed herein, including Claimants’ request for punitive damages, are denied. FEES Pursuant to the Code of Arbitration Procedure, the following fees are assessed: FILING FEES FINRA Dispute Resolution assessed a filing fee* for each claim: initial claim filing fee = $1,800.00 *The filing fee is made up of a non-refundable and a refundable portion. MEMBER FEES Member fees are assessed to each member firm that is a party in these proceedings or to the member firm(s) that employed the associated person(s) at the time of the events) giving rise to the dispute. Accordingly, as a party and member firm, Respondent CGM is assessed the following: Member surcharge = $2,800.00 Pre-hearing process fee = $ 750.00 Hearing process fee = $5,000.00 HEARING SESSION FEES AND ASSESSMENTS The Panel has assessed hearing session fees for each session conducted. A session is any meeting between the parties and the arbitrators, including a pre-hearing conference with the arbitrators, which lasts four (4) hours or less. Fees associated with these proceedings are: One (1) Pre-hearing session with a single arbitrator @ $450.00/session = $ 450.00 Pre-hearing conference: June 2, 2010 1 session One (1) Pre-hearing session with the Panel @ $1,200.00/session = $1,200.00 Pre-hearing conference: September 14, 2009 1 session Eleven (11) Hearing sessions @ $1,200.00/session = $13,200.00 Hearing Dates: July 12, 2010 2 sessions July 13, 2010 2 sessions July 14, 2010 2 sessions July 15, 2010 3 sessions July 16, 2010 2 sessions Total Hearing Session Fees = $14,850.00 The Panel has assessed $7,425.00 of the hearing session fees jointly and severally to Claimants. The Panel has assessed $7,425.00 of the hearing session fees jointly and severally to Respondents. All balances are payable to FINRA Dispute Resolution and are due upon receipt. ARBITRATION PANEL Myron E. Levenson – Public Arbitrator, Presiding Chairperson Joseph Benalt – Public Arbitrator Donald R. McGahan – Non-Public Arbitrator CONCURRING ARBITRATORS’ SIGNATURES /s/ Myron E. Levenson Signature Date Public Arbitrator, Presiding Chairperson /s/ Joseph Benalt Signature Date Public Arbitrator /s/ Donald R. McGahan Signature Date Non-Public Arbitrator August 3, 2010 Date of Service (For FINRA Dispute Resolution use only)

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