Articles Tagged with stockbroker

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AdobeStock_78797750-300x199It’s your money.  You worked hard to earn it. It’s taken years to save it. Now you need to protect it. Here are some tips to help you make more informed investment choices and protect yourself from investment scams.

  1. Check out the “salesperson.” Just because someone says they have a securities license doesn’t mean it’s true. We recently had a potential client call with a complaint about his “stockbroker” who we quickly discovered hasn’t been licensed since the 1990’s. Checking out purported stockbrokers is easy and free at FINRA’s BrokerCheck site. In addition to information about the securities licenses the individual has, it will show you his or her employment history, if he or she has ever filed for bankruptcy, and any customer complaints or charges by securities regulators.
  1. Don’t believe promises of little or no risk with high returns. The higher the returns, the riskier the investment. Period. 
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When you open a brokerage account, you most always agree to bring any future disputes that arise with your stockbroker or brokerage firm to FINRA for adjudication. This means you give up your right to a jury trial.

FINRA offers both arbitration and mediation services. In a nutshell, mediation is where a neutral third-party attempts to help the parties reach an amicable settlement. Essentially, the mediator points out what he or she sees are the strengths and weaknesses of each party’s position. In arbitration, one or three arbitrators (depending on the amount in dispute) hear testimony, review evidence, and render a binding decision. It is possible to utilize both methods in the same case.

Here are some of the main ways that arbitration and mediation differ.

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stock marketIf you have lost money in a securities investment, obviously you would be happy to recoup some of those funds.  Many companies that offer assistance with recovering lost capital, however, are likely fraudulent.  A company may sound credible, have authentic looking documents, and a fancy website, but if the deal sounds too good to be true, it probably is a scam.

Tips for Investors

  • Be a Skeptic. Assume that any “recovery” company that reaches out to you is a fake until you can independently verify it is a legitimate company – especially if it claims to be registered with FINRA. Look it up on FINRA’s BrokerCheck site and use the contact information on the BrokerCheck report to reach out to the firm.
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How to handle the finances after the death of a loved one.

In September 2016, the Florida Office of Financial Regulation issued a Consumer Alert titled “Managing Finances After the Death of a Loved One.”   The alert makes a number of helpful recommendations to take following the death of a family member or loved one including:

  • Gathering important documents such as wills, Social Security cards, insurance plans and brokerage account statements.
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The financial industry is highly regulated, and for good reason.   People entrust their stockbrokers and financial planners with some of the most important decisions in their lives, namely, what to do with their hard earned life savings.  Money is important, and especially for the elderly and retired, it cannot always be replaced.   If money is lost in bad investments, there might not be time to earn more money back.

When brokers and planners go bad.

And let’s face it, some brokers go bad.   Sometimes, brokers steal money from their clients. Sometimes, brokers make foolish or unwise recommendations.  The broker might do this because he or she is struggling to meet a sales quota, or maybe he or she is just no good at his or her job.

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Virtually every new account application with any brokerage firm contains a pre-dispute arbitration agreement. This agreement requires that any dispute you have with your stockbroker or brokerage firm be filed with the Financial Industry Regulatory Authority (“FINRA”) instead of being filed in court. The FINRA arbitration process differs from the court system in several key aspects: the case will be decided by 1 or 3 arbitrators instead of a jury; there are no depositions or interrogatories permitted in FINRA arbitrations (with very limited exceptions); FINRA arbitrations are not a matter of public record (the only aspect of FINRA arbitration proceedings that is made public are the awards); and there are extremely limited grounds for appealing a FINRA arbitration award.

The way a FINRA arbitration case generally works is this.

Claimant files the initial document that begins the FINRA arbitration called the Statement of Claim.  It identifies the parties, contains the allegations of wrongdoing, and sets forth the amount of damages being claimed.  Once it is filed with FINRA, FINRA will serve it on the named Respondent.   The Respondent then has forty-five (45) days to file a Statement of Answer.

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When Selling Municipal Bonds What are the Broker’s Obligations

Many brokers and customers mistakenly believe that municipal bonds are always a “safe” place to be.  The recent debacle in Puerto Rico proves this is not the case.

The law imposes special obligations upon brokers who sell municipal bonds.

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If you have a brokerage account, you have probably received a pitch from your broker for a securities-backed line of credit (SBLOC).  Contrary to the flashy marketing brochure you may have seen, SBLOCs aren’t the best things since sliced bread.  Know the facts before you consider one.

An SBLOC is a non-purpose revolving line of credit using the securities held in your brokerage account as collateral. “Non-purpose” means you do not have to use the proceeds for a specific purpose like you do with an auto loan or home mortgage.  Basically, you can borrow cash against the value of your investment portfolio to finance basically anything from travel and college expenses to home renovations and buying a car.  Pretty much the only thing you can’t do with an SBLOC is use the money to purchase or trade securities.  This “easy money,” however, doesn’t come without cost or risk.

Typically, an SBLOC agreement will allow you to borrow between 50-95% of the value of your investment portfolio depending on the value of your overall portfolio and the types of investments in the account (i.e. stocks, bonds, etc.)  The interest rates charged on an SBLOC usually follow the broker-call, prime or LIBOR rates plus some stated percentage. SBLOCs typically require you to make minimum payments every month, oftentimes the minimum payment is the calculated interest amount. Because the published interest rates fluctuate, the amount of interest you are charged daily may also fluctuate.

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In our law firm, we frequently represent elderly clients in claims against brokerage firms and financial advisors.  These claims usually include allegations that the broker took advantage of the elderly client, or recommended improper investments that benefited the broker more than the client.

Why and how do the elderly become so vulnerable to stockbroker abuse?  Some of the answers may surprise you.

Isolation and Loneliness  We have seen, over and over, elderly clients who are isolated and lonely.  We practice in South Florida, a haven for elderly retirees.  Many times, our clients’ families and loved ones live thousands of miles away.  On a day-to-day basis, these clients have very few friends or social interactions.

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Are you just starting to invest and ready to open your first brokerage account? Are unhappy with your current broker?  Here are some tips from the Financial Industry Regulatory Authority (FINRA) on how to find the right financial advisor and brokerage firm.

Ask for Recommendations

Talk to your friends and family members about who they invest with and for how long.  Ask them specific questions about their broker such as the kinds of services they were provided, whether the broker communicates with them regularly, have they had an problems or “bad experiences” with either the broker or his/her brokerage firm?  Don’t hire a broker just because he or she came highly recommended, and don’t stop when you get one name. Try to compile a list of at least 5 potential broker candidates.