DO YOU
HAVE A CLAIM
FOR INVESTMENT LOSSES?
Many of the common problems that investors
have had with their stockbrokers and registered investment
advisors are set out below.
Stockbrokers and investment advisors
have specific duties and responsibilities. In California,
and in many other states, stockbrokers are considered
to be fiduciaries, because of their specialized expertise
in financial matters, and the fact that their relationship
is based upon the customers' trust
Given the high standard of care, the
high volume of customers and trades, the high volatility
of stock prices, and the new, automated forms of trading,
large and small mistakes can and do happen. Not
every trade is executed correctly. Not every recommendation
is suitable. Not every broker is honest.
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More
losses than there should be
In the grand scheme
of things, it is unusual to find a customer who has
been totally wiped out, i.e. lost everything he had
invested and then some, because of the market crash. When
this occurs, it is always appropriate to ask "how
did this happen?" Brokers
have a duty to dissuade customers who want to take more
risk than they can afford and brokerage firms have systems
in place both to weed out unsuitable customers and to make
certain that customers understand the risks going in. Losing all or a very
large percentage of the amount invested is more common
in "private investments" or where the customer
dealt with a firm that intended to fleece him from the
outset.
More losses
than you expected
Before a broker
can recommend any investment to a customer, the broker
must be satisfied that the customer understands how
much can be lost, is willing to risk this amount and
can afford to do so. While this calls for
some judgment on the part of the broker, customers
most frequently complain about violations of this rule
that are more flagrant than subtle. Brokers clearly
violate this rule when they describe as "safe" or "guaranteed" or "solid" an
investment that is inherently very risky.
Losses where
you don't expect them
You would not,
for example, expect to find risky commodity trades
in the account of a small local charity. You
know, instinctively, that the charities' money does not
belong here. Nor would you expect seniors or retirees
to place large "bets" on speculative investments. Pension
plans, retirement accounts, trust accounts, endowment
funds and fiduciaries who are investing for others, are
generally expected to "protect and preserve" the "corpus" of
their investment. Where these types of funds are invested
in high-risk investments or strategies, further inquiry
is generally warranted |
Lots
of trades
Good old fashioned "churning" is
still with us. Its
easy to spot in the sense that the account looks like its
being traded, in and out, of stocks or options, for short
term profit. If the customer considers him/herself
to be a trader, and is directing all of the purchases and
sales, the general rule is "so be it." If
the broker is directing the trades, either because the
customer has given the broker authority to trade the account,
or because the customer routinely follows the broker's
instructions, there is frequently a problem
Trades you
found out about later
Brokers who trade
customer's accounts without written authority have
always been a problem in the securities industry and
the industry has a long history of expelling brokers
who do it. Unless
the customer signed formal agreement for the broker
or investment advisor to trade the account, the broker
is required to discuss each and every trade with
the customer, before they write the ticket. If you let
your broker or investment advisor handle your account,
or if you first found out about trades when the confirmation
slip came in the mail, there is reason to suspect
that the account was not properly handled.
Margin losses
Trading
on margin always increases the risk associated with the
purchase of any security. In the recent
past, high volatility in many stocks has magnified
that risk even farther. Not everyone, therefore,
should be on margin, although everyone who is on margin
should clearly understand the risks. Given the high
volume, high volatility and lots of new investors,
brokerage firms have tightened up the rules and procedures
surrounding margin accounts, and especially, margin
calls. Many margin complaints are directed at
so-called "discount brokerage firms" who,
lacking registered representatives who actually get
to know their customers, often use impersonal means
to notify customers, and who seem more likely to liquidate
customer's positions |
Private
investments/Hedge Funds/Real Estate LLC’s
Many
people have been lured into funding new businesses
that are not yet publicly traded, or investing in private “hedge
funds” that are, for the most part, unregulated. Many
of these ventures may have been good faith attempts by
legitimate people to make a business grow, but this is
also the area that we find a lot of truly neophyte investors. These
investors, who don't belong in these types of investments,
frequently got here by accepting the recommendation of
a financial planner or independent stockbroker
Real estate limited partnerships
or “LLC’s” are also frequently sold
as “safe” but with comparatively high returns,
when in fact they are speculative investments in which
the investor could lose his or her entire investment.
If any of these scenarios apply to you, Contact
Us!
No fee, no obligation, just an opportunity for you
to sit down with nationally recognized securities professionals
who will tell you the truth about the likelihood of
your winning in securities arbitration.
And, if we think we can help you,
we have several recovery options available, including
a no recovery, no fee option.
Contacting us may
well be the
smartest investment move you ever made.
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