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Fight Back: Dishonest Brokers

2/9/2006

Money Magazine

Greed is not good if it means the broker wins, not you. Here’s what you can do.

By Ellen McGirt with Kate Ashford, George Mannes and Pat Regnier, MONEY Magazine

NEW YORK (MONEY Magazine) – Unlike, say, salespeople in a clothing store, brokers are obligated to see that what they sell fits you — your financial condition and sophistication, investment objectives and tolerance for risk. But complaints of unsuitable investments are among the most common to reach the NASD, the securities industry’s self-regulator. And it goes beyond brokers stuffing your 90-year-old Uncle Jack’s portfolio with penny stocks. Last year the NASD fined brokers $40 million for steering their customers into certain share classes of mutual funds, maximizing the brokers’ take at their clients’ expense. How to fight back:

1. Find a boss

First, complain to your broker’s supervisor or compliance department. (Ignore a broker who says he’s his own boss; there’s always a higher-up.) Document your phone call. Take care in any subsequent written correspondence not to weaken your case. “Don’t cast blame on yourself or make unneeded admissions,” says Mason Alan Dinehart III, a securities arbitration veteran whose Web site, has many helpful resources.

2. Get a big gun

Better than writing the letter yourself, says Dinehart, is getting a securities lawyer to write one for you. “If they see you have backup,” he says, “it’s much more likely they’ll fix the problem.”

3. Tell the authorities

Depending on where you live, your state securities regulator may be willing to take on the broker. You can also file a complaint with the NASD, a particularly useful tactic if your claim is too small to justify hiring a lawyer.

4. Move quickly

You’ll have a stronger case, more rights and an easier time undoing wrongs if you act as soon as you become aware of the problem, says attorney Philip M. Aidikoff, who represents aggrieved brokerage customers. “This isn’t something people can sit on their hands about.”


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