San Diego, CAAs if investors don't already have enough to worry about, what with the long list of financial firms facing financial trouble and the stock markets taking a nose dive, stockbroker fraud has become the concern of some investors. Many are turning to stockbroker arbitration to settle their claims. Sadly, although investors can recover funds through stockbroker arbitration, it seems that there will always be unscrupulous stockbrokers who are willing to take advantage of their clients.
Angelain L. says that her stockbroker purchased $250,000 worth of preferred stock in banking and brokerage companies without her consent. "In January 2007, I approached my broker to purchase $250,000 of preferred stock. He was to recommend 10 companies for my review. I specifically told him 'no banks.' When he was unable to contact me for final approval, he purchased the securities, which were all banks, brokerage firms and lending institutions. The preferred stocks include Lehman Brothers, Countrywide, Merrill Lynch, Bank of America and Bank of Scotland. All of the securities have either 'perpetual' maturity dates or maturity dates of 2035 or 2066. At the time of the purchase I was 52. I have no children.
"I approached him in May 07, to sell these items. He sent me written documentation to convince me to keep them. In May of this year, I caught him making unauthorized trades in my account unrelated to the preferred [stocks] and reported him to the office. During the interview, the manager brought up the preferred [stocks] and tried to force me to say I had decided to keep the preferreds because I was receiving interest."
Investors face more than enough turmoil right now, with all the problems in the market. They should not also be concerned that their stockbrokers are conducting unauthorized transactions on their accounts. Unfortunately, that is what sometimes happens. Some stockbrokers see their clients as personal bank accounts—an easy way to make some extra money by churning the account and driving up commissions.
Regardless of whether an investor has $1,000 or $1,000,000 invested, she has worked hard for that money and has the right to use that money however she sees fit. It is not the stockbroker's job to arbitrarily decide that he knows best and should take action on his own. That's why they are called financial advisors. It is their job to advise the client, but not to go against the client's wishes.
Unfortunately, investors like Angelain face this problem more commonly than they might expect. After all, stockbrokers have a code of ethics they have to uphold and that code includes acting in the best interests of their clients. But, like any profession, there are those in the profession that are more interested in personal gain than in helping their clients.
Fortunately, investors can turn to stockbroker arbitration to recover their lost funds. Stockbroker arbitration is one way that the industry regulates how those that work within it conduct themselves and provides a forum for investors to file claims against their brokers. Such complaints include unauthorized transactions on accounts, negligence, suitability violations or churning an account.
Of course, there are many ethical stockbrokers out there—advisors who will go the extra mile to ensure that their clients' best interests are fully met and who would never, ever consider doing anything illegal for their own personal gain. But there will also always be people who are more interested in making easy money than in properly investing their clients' money. For people who are victim to these unscrupulous brokers, it's a good thing there is FINRA stockbroker arbitration to turn to.