A FINRA arbitration panel ordered Citigroup Inc. to pay $10.75 million to an investor who claimed former broker Edward James Mulcahy was grossly negligent and that the firm's branch manager failed to supervise his financial advisor, allowing overconcentration damages to persist.
Mulcahy, who is now registered with Morgan Stanley, was additionally charged with breach of fiduciary duty, breach of contract, and violations of federal and state securities laws, NYSE and NASD/FINRA conduct rules. He was ordered to pay compensatory damages of $250,000, plus interest.
According to the findings, Mulcahy was liable failing to implement an adequate risk management strategy regarding overconcentrated positions of Royal Bank of Scotland (RBS) stock in several investment accounts.
Overconcentration in any one stock or industry can unnecessarily increase risk and is an area of jeopardy your financial advisor has a fiduciary duty to avoid.
The Chicago Tribune notes that RBS was one of the firms bailed out after the 2008 financial crash; Mulcahy left Citigroup in 2009.
Mulcahy's FINRA BrokerCheck report reveals that Citigroup previously settled a claim against Mulcahy alleging failure to supervise during the 2004 through 2006 period for $60,000, settling two over similar failure to supervise claims for $100,000 and $321,575.
Claims against then-Salomon Smith Barney Inc. broker Mulcahy alleging churning, suitability, breach of fiduciary duty and account related negligence filed in 1995 were withdrawn as the firm settled for $60,000.
If you have invested with Edward James Mulcahy, Citigroup or with any firm, broker or financial advisor whose failure to properly manage and allocate your portfolio has created an area of overconcentration and this failure to maintain diversification has proven harmful to your investments or financial interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.