Patricia Sukonik claimed in an arbitration hearing before the National Association of Securities Dealers that Merrill Lynch mishandled her account from early 2000 until the fall of 2002, Dow Jones reported. The problem: she thought she had more funds in the account than she did because the company didn’t properly explain the account to her, Sukonik charged.
The arbitration panel disagreed. “The sole reason that claimant’s Merrill Lynch accounts declined in value was the claimant’s overspending,” the panel wrote, adding that the company “made every possible attempt” to accommodate her dyslexia. Written decisions are unusual for arbitration panels, but in this case the three panelists issued a six-page, 40-point decision outlining their reasons.
Sukonik claimed the company used an options strategy that involved writing covered calls to generate income from her stock portfolio, which was too risky – a claim the arbitrators rejected, finding that she had no significant loss attributable to the covered call writing strategy. Covered-call writing involves selling call options contracts backed by stock shares owned in an account, in an attempt to take advantage of a declining or flat stock.
She also said Merrill didn’t explain her ongoing account value in a way that a person with dyslexia could understand. However, Merrill countered that Sukonik understood her brokerage statement well enough to call and complain about commission charges for a trade, and that its statements displayed the account value prominently on the first page of every statement.
The account, which totaled $400,000 when she first came to Merrill, was her sole source of income, and she sought to recoup $200,000 in damages in arbitration. The company said she was told verbally that she couldn’t withdraw the $41,000 annually that she wanted to spend without eroding the account value, and was warned about 15 times that she was overspending.
Merrill Lynch spokesman Mark Herr said the company was pleased with the award. “As the panel clearly found, the investor’s accounts diminished because she overspent her accounts,” he said.