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Securities Regulation Keyed to Cox
Arceneaux v. Merrill Lynch, Pierce, Fenner & Smith, Inc.
Citation:
767 F.2d 1498 (1985)Facts
Phillip Arceneaux, a Louisiana State University graduate with a degree in Mechanical Engineering employed as a regional sales manager, had prior investment experience with Merrill Lynch in Dallas and Mobile before moving to Clearwater, Florida. In October 1980, after attending an investment seminar hosted by broker Don Ribaudo and investment analyst Joseph Granville, Arceneaux opened a securities account with Ribaudo at Merrill Lynch’s Clearwater office. Arceneaux signed an options information sheet indicating his investment objective was “trading profits” and an options agreement warning of inherent risks. However, Arceneaux testified that Ribaudo did not discuss risks with him. During the fifteen months Ribaudo managed the account, it experienced extreme volatility, with the account turning over eight times on an annualized basis. By June 1982, when Arceneaux closed his account, he had sustained a net loss of $45,697 while Ribaudo earned $11,179 in commissions. Expert testimony established that twenty-five percent of the original capital ended up as commissions to Ribaudo.
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