Merrill Lynch must pay $3.6 million to an heiress from Brazil who said she lost tens of millions of dollars due to unauthorized trades made by her brother in her account, a securities arbitration panel has ruled.
The ruling, by a Financial Industry Regulatory Authority arbitration panel on Tuesday, is the outcome of a case filed in 2008 in which the heiress, Camelia Nasser de Kassin, asked for more than $21 million in damages.
The case was filed in the name of Sophin Investments SA, a company set up to handle an inheritance Kassin received from an uncle, according to her lawyer, Barry Fischer of New York.
A spokesman for Merrill Lynch, a unit of Bank of America Corp , declined to comment.
The FINRA ruling is just one facet of a larger battle between members of the prominent Nasser banking family from Brazil and Merrill Lynch over various and steep trading losses.
Merrill, in addition to its involvement in the arbitration case, sued three members of the Nasser family in 2008 for massive trading losses, leading to a $99 million judgment that was recently upheld by a New York appeals court.
In the FINRA arbitration, Sophin accused Merrill Lynch of letting her brother, Ezequiel Nasser, make $389 million in unauthorized trades thought accounts at two Merrill Lynch units, according to Fischer.
Nasser, who invested in risky securities such as naked puts in Bear Stearns and Lehman Brothers - a type of options strategy - ultimately left a deficit totaling between $10.4 million and $11.4 million in the two accounts.
Sophin accused Merrill of not supervising its staff, trading without authorization and civil fraud, among other things, according to the arbitration award. Merrill denied the claims and filed a counterclaim against Sophin for breach of contract, seeking a total of $5.5 million for the deficits in the two accounts.
Arbitrators, in the decision on Tuesday, found both parties liable. While Merrill must pay Sophin $6.1 million, Sophin must pay Merrill $2.5 million. The panel admonished Merrill for "lapses in record keeping and supervisory procedures" but said they did not indicate a widespread problem at the company.
Fischer, Kassin's lawyer, said he is "disappointed greatly" by the decision. "The magnitude of the award doesn't make up the damages that Merrill Lynch caused," he said.
Dow Jones reported the award earlier on Wednesday.
(Reporting By Suzanne Barlyn; Edting by Steve Orlofsky)