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Smith Barney Municipal Bond Funds Arbitration Award is Largest Securities Arbitration Award Ever

May 9, 2011
Colson Hicks Eidson

Sunday’s New York Times business article, “A Crack in Wall Street’s Defenses,” discusses the largest ever securities product arbitration award to individuals. The award, against Smith Barney, compensates individuals who wanted relatively safe investments, municipal bonds, but were sold highly risky arbitraged municipal bond fund portfolios. The only ones benefiting were the brokers, whose commissions were 40 percent of the total fee.

The arbitrators rejected all three defenses frequently relied upon by the financial industry: the financial crisis is to blame; wealthy, sophisticated clients understand the risks; and the prospectus warned you about the possibility of loss. They so soundly rejected the defenses that they awarded punitive damages, market-adjusted actual damages and legal fees to the victims of the fraud.

This financial products award, and the publicity surrounding the risks of municipal bond funds, is a wonderful result for consumers. It fully substantiates our law firm’s belief that this is a viable cause of action. Our law firm has successfully handled this type of case for years. This scamming of consumers in an effort to grab fees, whether the consumers are wealthy or not, must be stopped.