Recently, several national full-service brokerage houses have paid large fines for negligence in the handling of investors’ savings. Billions of dollars have been lost because of the failure of these brokers to use a reasonable standard of care with investor money.
A recently published analysis of the holdings by Merrill Lynch Mutual Funds illustrates the concerns of many investors. Merrill Lynch was continuously recommending public clients “buy” or “accumulate” stocks that were being sold out of Merrill Lynch Mutual Funds. These stocks include:
- Nortel Networks (NT)
- Extreme Networks (EXTR)
- Corning Glass (GLW)
- Applied Micro Circuits (AAMC)
- Juniper Networks (JNPR)
- BEA Systems (BEAS)
Then, there are the Blodget 24 stocks that Merrill Lynch internal e-mails trashed while their public position was favorable. While Merrill Lynch maintained this positive position, its own Master Internet Securities Fund owned 13 of these securities and sold all shares of 10. These are just a few examples named by concerned experts.
Many investors are embarrassed to speak-up about their losses. Some feel there is nothing they can do. But there is something they can do, and many have. They have recovered some or all of their losses when those losses were the result of broker mistakes.
Some common examples of these mistakes include:
- Unsuitable recommendations or investments
- Unjustified risk for an investor’s objectives
- Misrepresentation or omission of risks
- Churning (excessive trading to boost commissions)
- Failing to follow instructions
- Unauthorized investments
- Conflicts of interest
A broker has a responsibility to inform investors of all risks and to not inflate a security’s potential. The broker must make recommendations that are consistent with the investor’s tolerance for risk and investment goals. A broker may be liable if material facts are misrepresented or omitted.
Have you suffered greater losses because of mistakes or inappropriate behavior of a broker? The best way to determine if you have a claim is to have your case reviewed by an attorney.
Most brokers require their investors to enter binding arbitration agreements. A lawyer can assist you in filing a complaint with a self-regulatory commission.
Frequently Asked Questions
What is binding arbitration?
Most securities brokerage firms require you to agree to pursue any grievance through arbitration proceedings instead of the court system. An attorney can help you understand what your firm requires and how to best prepare for and initiate a complaint.
What will an attorney evaluate for me?
Your attorney will consider the following and other questions:
- Was there misconduct by the broker?
- How much money can you recover?
- How good is your proof of misconduct and your loss?
- Do you have a choice between court and arbitration?
- How much will it cost to pursue your claim?
- How likely is it that your claims are barred by time limits?
- Will you be able to collect any award or judgment?
What are some examples of broker mistakes that led to successful complaints?
- Unsuitable recommendations or investments
- Unjustified risk for an investor’s objectives
- Misrepresentation or omission of risks
- Churning (excessive trading to boost commissions)
- Failing to follow instructions
- Unauthorized investments
- Conflicts of interest
