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Timing is critical – something Reid Hospital & Health Care Services knows first hand. In 2011, the Richmond, Indiana, hospital lost more than $2.5 million after a foul-up on the part of investment powerhouse Oxford Financial Group Ltd. of Carmel and a 11-day delay in cashing in tens of millions of dollars of securities investments.
The good news is that the American Arbitration Association has ordered Oxford to pay the hospital $2.2 million.
Reid Hospital took Oxford to court last year, arguing that the trades it authorized on Aug. 1, 2011, were not executed until Aug. 12. That 11-day delay proved costly for Reid. Had the sales occurred when the hospital requested, it would have spared the investments from getting whipsawed by an announcement from Standard & Poor’s Corp. on Aug. 5 that it was stripping the United States of the AAA credit rating it held for 70 years.
Oxford was aware that stock prices had become volatile in late July and that the difficult conditions were continuing into August, Reid alleged in its 18-page lawsuit, which was later transferred to arbitration.
In fact, in an Aug. 5 update issued to Oxford clients, the firm “recognized that the market was firmly in correction territory, economic recovery looked weak, government stimulus was fading, risk of policy mistakes was high, and equity valuations were high by historical standards,” according to the suit, which was filed by the law firm Maddox Hargett & Caruso P.C.
Mark Maddox, founder of Maddox Hargett and Caruso and the hospital’s attorney, noted that Oxford markets itself as superior to a broker-dealer because advisory firms owe a fiduciary duty to their clients. He said in an July 20 story by the Indianapolis Business Journal he found it ironic that in the arbitration Oxford attempted to use that status as an investment adviser to relieve itself of responsibility for the losses.