Posted on 02/12/2009 10:04:24 PM PST by bootless
Hey everyone -
This is not for me, but I'm trying to find out some options for a friend. It's possible they have a good case against their broker for negligence and breach of fiduciary responsibility.
Anyone who's got some knowledge or background, could you please Freepmail me? Thank you.
Ping, please?
ping please?
Hmmmm. To be swindled by a stock broker is bad. To be swindled by a shyster lawyer on top of it is worse.
True. Rather than looking for a lawyer, I’d like to get some reality-based knowledge from someone with no dog in the fight.
I can tell you, these types of claims are very, very difficult to pursue to any positive result.
Here’s a list of some of the obstacles:
The idea of the SEC being on the investor’s side is absolutely laughable, it’s one of the biggest lies in existence.
Most brokers are NYC-based, and such claims are typically referred to their lawyers who are very skilled at obfuscating and intimidating.
I hope I don’t have to tell you that mere stock market losses aren’t anything anyone can [successfully] gripe about.
If, for example, your “victim” gave instructions to the broker to [for example]
“don’t let this account suffer more than a 7% loss, sell me out”
“absolutely no tech stocks”
“I want 2/3rds of my port in fixed-income”
and your vic thinks those instructions were violated, AND, the broker has truly established a fiduciary duty [eg; is a paid advisor with a signed fiduc agreement OR is the named executor of the estate or trust, also by signed agreement......and not just an Etrade dude] then those instructions had better be in the form of certified/registered letters and agreements which can be dated and documented. Otherwise it’ll just end up as gassing in the wind.
These are very tough and usually very lengthy claims to pursue.
Two words: Madoff. [still in his] Apartment.
I don’t, but I’ve got a great stock for you.
How do you know you have such a great case against your broker?
Where did you get your CPA license, or your stock brokers credentials?
That is the first questions the brokers attorney is going to ask you.
:) Thanks, but it really isn’t for me. I don’t hold any stocks.
I can’t go into the details on the open board, but would like to get some nonpartisan information, and FR has always been a great source of knowledge.
Thanks for all that... this was a real broker, and it’s more than just losses. I know that losses are a tough sell.
You’ve raised some excellent points, thanks.
Good luck,
How is fraud a partisan issue?
Either you have a case or you don’t. If you are bringing allegations, you have to prove it. If you are going up against people who ‘have knowledge’ such as certificates, degrees, and a number of years experience in the field, your claims may not hold a lot of weight.
Again, good luck!
Where to begin? More than likely, your friend is going to have to go to arbitration—probably signed something to that effect when he opened up the account. It’s pretty hard to sue a broker unless it was outright theft or blatant fraud. It’s also hard to win arbitration. As a poster upthread said, the system’s kind of stacked against you. It’s you vs. the financial services industry. The odds are NOT on your friend’s side.
This will be jumbled and disjointed, sorry...
Has your friend done anything to mitigate the losses he has been incurring due to negligence? In other words, has he liquidated what’s left in the account the broker was negligent about? If not, it’ll be hard to win a case. If you truly think the broker’s losing you money, you’d better close the account. Why would you leave it there if you think he’s incompetent? You MUST cut the losses.
Start a paper trail. Send a letter to the broker and the broker’s supervisor/branch manager telling him to cease and desist—no more trading in the account, and here’s why. Then close the account. Unless it’s in writing, nothing happens. When they have it in writing, they have to act, and the written complaint becomes part of the broker’s compliance record.
Write another letter. Write down in VERY detailed precision EVERYTHING the broker did or did NOT do that caused the losses. Be specific. Dates and times. Names. Who did what. You must be accurate. What exactly did the broker say? Did he fully disclose the risks? Did he misrepresent something? Did you understand the risks? Tell a compelling story. This story of the situation will wind up being the basis for your arbitration claim. The clearer and more persuasive the letter is, the bigger the effect on the eventual arbitrators.
There’s far too much to go into here. Have your friend read up and study this site:
http://www.finra.org/ArbitrationMediation/index.htm
...and see if arbitration is likely or makes sense.
He’ll need to fill out a Uniform Submission Agreement
http://www.finra.org/web/groups/arbitrationmediation/@arbmed/@neutrl/documents/arbmed/p009439.pdf
Things your friend will want to carefully consider to see if he has a case:
Were the investments suitable for your friend? Was he the right type of person for those types of investments? Did the broker find out his goals and risk tolerance? Does the broker have that in writing? Were the investments in line with that risk tolerance determination?
Were all potential risks fully disclosed and discussed?
Did the broker have discretion in the account? Could he make trades in specific securities without getting the client’s permission each time? Did he engage in excessive trading (churning) in order to generate more commissions?
Did he ever make trades in the account that the client didn’t authorize?
Did the broker ever fail to obey a standing order from the client?
Did the broker tell your friend something that simply was not true? (Whether he intentionally lied or was just wrong, either way.)
Did the broker make or imply some sort of guarantee? In specific words, what did he say the investment would do? What did he say it COULD do?
Did he fail to give the client ALL the necessary info?
Did he disclose all fees or commissions?
Does the client feel that the losses/negligence/etc. would not have happened if the broker had been better supervised? In other words, did the firm or the manager not pay close enough attention?
Anyway, that may get your friend started. Make sure he reads the FINRA site about arbitration very carefully. If he doesn’t have a very strong case, he probably won’t get anything back.
I don’t think the OP meant “nonpartisan.” I think he meant “unbiased” or “objective.” From somebody who doesn’t have a chit in the game.
Also, your friend may want to check the broker’s CRD record, to see if he has a record of similar negligence or problems:
http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/index.htm
When one party became "The Lawyer Party", I'd say.
The problem today is widow and orphan stocks are down 60-90% in some cases. If he lost his money in GE, T, COP, C, and other types of blue chips, he's toast. Even diversified mutual funds are down big. You can sue anyone for anything, but he most likely signed a paper saying he understood he could lose his money.
Having said all this, did the broker do something specifically against his wishes? I had a friend that checked his account one month and the broker had been churning his account to raise his fee's and lost a bunch of his money. The broker said my friend told him to trade so he did, and my friend denied he ever told him to do the trades. In the past, my friend had only made a few trades a month and this month he made about 3 times the usual amount. The brokerage firm made a partial settlement but denied the broker did anything wrong. His word against the broker's. That's when I went to trading on the Internet on my own. You will see class action suits periodically on TV, but you get $5 and the lawyer gets $millions.
I assume your friend has talked to the broker’s manager?
Before going the lawsuit route, try to work within the firm’s system. As an X-broker with ML, I can say their internal system allows managers at various levels to “make right” the majority of complaints.
Exactly. It was a long day. Thank you for all that information -I'm checking out the site right now.
And a ping!
The FINRA site was extremely helpful, thanks!
I’m glad it was useful.
Thanks - I learned a lot. I have a couple of specific questions that I’ll send to you by FReepmail, if that’s okay.
That is a very valuable site. Thank you.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.