Posted in: FINRA | Arbitrations | Greedy Brokers | Breach of Fiduciary Duty | Risky Investments |
ABC News ran a story last week detailing the future of stock broker regulation, including arbitration reform.
But buried in the comments section of the article - which can be found here - is perhaps the most interesting nugget of information, as it sums up how many brokers feel when facing arbitration.
On January 27, a user named risuth posted the following:
I know right now Wall Street is the big bad guy. But as a Wall Street insider I can tell you that over the las (sic) 20 yrs, the majority of people walk into broker’s offices they expect miracles. A broker walks a very slippery slope. Even if you do right by a client, they’re never happy. They complain if the stock goes down and then they complain about capital gains if it goes up. They always say they understand everything and then if the invest goes down, they said that they didn’t understand. It’s he said he didn’t say. Arbitration is free to the public and believe me unless it’s a Madoff problem, you don’t want to pay court costs. It’s all about greed. The public is more greedy then you could imagine.
If this poster is indeed a Wall Street insider, as he claims, then these are clients he is writing about in his disparaging comment. This is a sentiment we often hear from brokers when facing arbitration. Not only do most brokers hate the idea of arbitrations, but also they offer up this common excuse for defending any broker’s involvement in arbitration.
The investor should have known better beforehand. The broker cannot control the market’s up-and-downs. The investor is unfairly targeting a broker for losses on his account.
But in reality, many of our clients have come to us after their brokers knowingly deceived them, even if it was not in exact Madoff-like fashion. Clients who have demanded their money be invested conservatively should not see the bulk of the savings lost.
Last week in New Jersey a stock broker, James Patten, admitted to a judge he actively traded in volatile and risky securities, which resulted in a loss of about $900,000, and lied to his customer to conceal which securities were being purchased.
In 2004, Patten’s client transferred $538,000 into the account, with instructions to invest in low-risk securities like Treasury Bills and municipal bonds. Instead Patten used half the money to pay off debt from a series of risky investments made in the account years prior. To cover all this up, he sent the customer a phony statement telling the customer the money had been invested in a municipal bond fund.
As a result of this big lie, Patten pleaded guilty to mail fraud and his former client lost nearly a million dollars.
Perhaps as the previous commenter had suggested, Patten had faced the pressure put on brokers to achieve high returns. Brokers are placed in a position of trust, and may yield this responsibility at any time, but have no right to blatantly mislead their clients.
When victimized in similar fashion, investors need to do anything in their power to bring the incident to light, as well as recover on a stolen investment. If you seek to initiate action against your former broker as the result of financial wrongdoing, contact one of our attorneys for a consultation.
