Legal Question in Securities Law in California

Re: misinformation by a broker

You have a case that should be investigated for NASD Arbitraiton I can refer you to attorneys who handle such matters.

Joel Selik

Attorney

Arbitrator for the National Association of Securities Dealers

800-894-2889

Re: misinformation by a broker

The strength or weakness of your case depends upon two factors: (1) just how poor-quality were the securities at the time they were purchased for your account, and (2) to what extent did the broker's act exceed the limits on his authority, either express or implied?

Just because the securities were not 'AAA' (and VERY few are these days!!!) doesn't necessarily make the broker's judgment actionably bad. There is some latitude, and judging in hindsight is not fair--the broker's judgment has to be evaluated on the basis of facts known at the time.

The second criterior relates to how much latitude the broker had, either by your explicit instruction or what was appropriate given your circumstances. You say only that the purchases were for a retirement account. It makes a big difference whether you are 23, 43 or 63 years old in defining what's an appropriate exercise of discretion.

If the case involves an out-and-out misrepresentation -- e.g. the broker said "These bonds are rated AAA by Moody's" and they were in fact only rated single-A, the strength of your case may depend upon your proof. In other words, this broker may say 'I never said that' and if he does, whom does the judge or arbitrator believe? Were there witnesses? Is anything in writing? Was the broker fired for similar indiscretions with other clients? All this would bear upon your chances of prevailing.

Re: misinformation by a broker

In the agreement with the Broker your investment objects should have been stated. An evaluation of the securities purchased in relationship to your investment objectives is important. In addition, other factors, though not an exhaustive list, are your age, your experience, your education, and the materiality, in financial terms, of the investment made by the broker on your behalf in relationship with your net worth excluding your home and automobiles. In a broker knowing his or her customer and the suitability of making an investment recommendation a thorough understanding of your particular facts are necessary.