A panel of arbitrators has awarded $13.1 million in damages, including $10.5 million in punitive damages, to a former customer of Stratton Oakmont Inc, a US brokerage that was closed for securities fraud and is in liquidation proceedings.

The award, made by a National Association of Securities Dealers panel to 76-year-old Indiana resident, Mr Edward Howard, is the largest such award to an investor in history, said Mr Richard Ryder, publisher of Securities Arbitration Commentator.

The second-largest, $10.2 million in mostly punitive damages granted to a California physician in April 1997, also involved former officers of Stratton. The $10 million punitive damages portion of that award was appealed but the judgment was recently upheld by a US District Court judge.

Mr Thomas Hargett, a partner in the law firm that represented Mr Howard, said that Mr Howard purchased 50,000 shares of Childrobics, a New York City-based operator of children's rides, from a Stratton broker, Eric Blumen, in the summer of 1994.

Although Mr Howard gave specific instructions that the shares be sold if they declined by 25 cents, Mr Blumen began buying more shares when the price had declined by that much, eventually purchasing 350,000 additional shares without authorisation, Mr Hargett said.

According to a case summary by the panel, Mr Howard's attorneys claimed Stratton used a "systematic scheme" to defraud Mr Howard - a retired naval aviator - that it used to defraud other unsuspecting investors. The summary says that Blumen contacted Mr Howard and convinced him to invest in a "speculative, small-cap stock investment that was inappropriate for a (then) 73-year-old retiree." At one point, Howard's entire net worth was tied up in such a speculative Stratton "house" stock (one in which the firm was a major market-maker), his attorneys claimed.