An investor has won an increased award for negligence from his former broker, Levesque Securities. George Zraik, a retail electronics store owner in Toronto, maintained investment accounts with the Levesque Securities Inc.

In July of 1993, Zraik opened a conventional stock trading account, dealing primarily in “blue chip” securities. At the same time, Zraik opened a commodities trading account and ventured onto the perilous seas of the futures market.

“He met with spectacular early success but ultimately fell victim to his own stubbornness and lost heavily because he insisted on sticking to his adopted theory that the Japanese yen would fall in value against the American dollar,” the Appeal Court wrote in its decision.

In an action against, Zraik was successful in persuading the trial judge that Levesque was negligent in failing to properly supervise his commodities account to ensure that it complied with the requirements of the law relating to trading in this type of securities and in not observing Levesque’s own internal guidelines.

Zraik appealed the amount of the award won at trial. He argued in his appeal that the trial judge erred in deducting profits earned in his account as a result of numerous different securities transactions in the years prior to 1995, when the cause of action arose. Additionally, the appellant alleges that the trial judge erred in deducting the gross pre-tax profits. The trial judge awarded $238,985 plus pre-judgment interest.

Zraik never communicated to the respondents that he was willing to risk the previous pre-tax profits from commodity trading. Before the contracts that led to the devastating losses in February and March 1995 were purchased, Zraik only had a few contracts in the accounts. “The account equity as of Dec. 30, 1994 was less than $50,000, not significantly more than it had been before the gains arose. He was essentially starting from a clean slate with approximately the same level of capital as the previous year.”

The Appeal Court Judge wrote in his decision: “I find offensive the notion that a brokerage firm, when called to account for a disastrous series of trades that were the direct consequence of its lack of supervision of the account, can defend on the basis that it is entitled to an offsetting credit for profits in earlier years when they were every bit as lax in supervising the account. The effect of this treatment of damages is to make Zraik and Levesque partners throughout. This result can only be justified in law by a finding that Zraik was negligent as well as Levesque and this is a finding that the trial judge was not prepared to make.”