Investors Get Settlement In Stock Broker Arbitration Claim

Kansas City, MOMost investors do not have a choice as to whether or not they go through stock broker arbitration to settle claims of stock broker fraud and other unethical dealings. The truth is that people involved in stock investing rely on their brokers for sound financial advice. Unfortunately, they do not always get it, resulting in stock broker arbitrations being filed.

In one recent arbitration, investors alleged that VSR Financial Services Inc., was negligent in its supervision of 2 former brokers, who were charged with 8 counts of securities fraud by Nebraska. The brokers sold high-risk investments in multiple Florida-based companies. In agreeing to the settlement, the owners and founders of VSR said they did not admit to any wrongdoing. VSR Chief Executive Mike Stanfield said that VSR did not sell the investments and therefore should not be held liable for the brokers' actions.

One of the brokers worked at VSR for 9 months but lost her Nebraska securities license in 2008. The other broker did not work directly with VSR but was a former business partner of the co-accused. According to the Miami Herald, investors claim they were defrauded out of a minimum of $20 million. They also say they wanted safe investments and were not told that their money was put in high risk investments. In fact, many of the complainants are reportedly at or near retirement age.

Included in the settlement is an agreement that the investors will try to collect the settlement amount from VSR's insurance company, AIG. The negligence case was filed on behalf of 249 VSR customers.

Meanwhile, in New York, 16 brokers and securities specialists were charged with fraud. Prosecutors allege the accused, who worked for or owned Joseph Stevens & Company, Inc., sold stocks at inflated prices to collect approximately $6 million in illegal fees. According to the charges, the brokers committed to buying numerous shares at a discount but did not buy those shares for clients until the stocks' value increased. Furthermore, the brokers allegedly did not disclose to clients that the stock was recommended because of the additional fees. Prosecutors further allege that the brokers manipulated the stock price themselves and, in some cases, those stocks lost "significant value" following their purchase.

Among the charges are enterprise corruption, grand larceny and securities fraud. According to Manhattan District Attorney Robert Morgenthau, one investor, a 70-year-old physician, was forced to come out of retirement after his investment lost $900,000 in one day. The broker had heavily promoted that investment. A different investor lost approximately $100,000 of his $300,000 personal investment and lost $850,000 from his pension fund, which was originally valued at $1.3 million, after he invested with Joseph Stevens & Company.

"Many of the customers affected by the defendants' wrongdoing were elderly and were retired or on the verge of retirement. The defendants' actions sometimes forced these victims back into the workforce to survive," according to Morgenthau's news release.

Prosecutors say that approximately 800 investors were duped by the scheme, which involved approximately $150 million in stock trades. The company is now defunct.

According to Forbes, the number of arbitrations filed against financial firms and brokers is virtually guaranteed to increase over the next little while. In fact, the number of arbitrations through April reported by the Financial Industry Regulator Authority (FINRA) has increased 81 percent since 2008.

As more investors become wary, and weary, of losses in their investments, they will look to FINRA arbitration to help them deal with situations where their brokers may have acted unethically.