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This video is provided for informational purposes only and nothing contained herein is or should be constituted as legal advice. If you have questions related to any legal topic, you should consult with an attorney and should not rely solely upon information provided via the internet. All content provided on this blog are subject to the Disclaimer at the bottom of the page. 
According to a recent article on InvestmentNews.com, a study commissioned by Charles Schwab revealed that a significant percentage of investors are unaware of the losses sustained in their accounts. To make matters worse, more than one-third of the investors surveyed did not know which mutual funds they owned and less than one-third spoke with their financial advisor or stockbroker on a regular basis.
In the article, a Charles Schwab executive was quoted as stating that “some investors tend to be overwhelmed or intimidated by investing.” This is interesting because it confirms the important role that stockbrokers and financial advisors play in investors’ financial decisions. While this seems elementary, it astonishes me as to how many broker-dealers take the position in arbitration cases that the stockbroker or financial adviser played a passive role in the losses sustained in the investor’s accounts.
The survey also reported that 60% of the investors surveyed do not plan to make any changes to their investment allocations following the stock market’s rapid post-September descent. Stockbrokers and financial advisers often tell their clients to “stay the course.” In addition (or alternatively), many advisers and stockbrokers will show their clients charts or other documents that show how following a decline in the stock market a large portion of the recovery often occurs on select days — thus reinforcing their recommendation to stay the course, otherwise taking the risk that the investor will miss those few opportunities to participate in the recovery. Following this recommendation, clients feel forced to hold the same investments that created their losses.
It is important not to ignore losses in your investment accounts for many reasons, including but not limited to the following:
1. It is more difficult to recover from a significant loss than it is to sustain the loss in the first place. For example, if you start with $100,000 in an investment account and you sustain losses of 50%, the value of your account would be $50,000. Therefore, you would need a gain of 100% of this reduced amount ($50,000) in order to recover from the 50% loss you sustained.
2. If you are sustaining losses that cause you to lose sleep (or suffer other emotional distress), your investment accounts are probably invested in an unsuitable manner. This is something that you need to discuss with your stockbroker or financial adviser. If your adviser is unwilling to make significant changes to the accounts, or worse yet, if the stockbroker tries to reassure you that the investments are appropriate, you should seek a second opinion. In addition, you may want to consult with a securities attorney to discuss whether you have a legal claim.
3. If you decide to file a claim related to your losses, any failure to act could reduce or diminish your ability to succeed in arbitration or litigation. Whenever legal action is initiated, there are several issues related to the timing of the investor’s actions and the claim itself that must be considered (including statutes of limiations, equitable defenses, and arbitration eligibility rules).
When a stockbroker or financial adviser makes a recommendation to his or her client, they (and the firms they represent) may be liable for losses resulting from the recommendation. The Kueser Law Firm represents investors in securities arbitration. If you are concerned that your investments have been mismanaged, contact us to learn more about your rights.
On July 21, 2009, the Securities and Exchange Commission (SEC) charged Morgan Keegan & Company. In its Complaint, the SEC seeks an injunction for violation of the federal securities laws, as well as equitable relief for Morgan Keegan investors. Included in this equitable relief is a request for a court order requiring Morgan Keegan to repurchase illiquid ARS from its customers. More about the SEC’s case, including a link to the Commission’s Litigation Release and Complaint can be found here.
The SEC’s Complaint alleges that Morgan Keegan misled thousands of investors about the liquidity risks related to auction rate securities (ARS). This is another example of the massive fraud related to Auction Rate Securities that was perpetrated by financial services firms across the country. To date, several firms, including UBS, Wachovia, TD Ameritrade, Fidelity, and Stifel Nicolaus have entered into settlements with federal and/or state securities regulators. Some of these settlements have broader relief for investors, while others have left many investors still holding onto these illiquid investments.
If you were sold Auction Rate Securities and your positions have not been redeemed or repurchased, you should contact an attorney to discuss your rights. The Kueser Law Firm represents investors in securities arbitration and litigation. Feel free to contact us if you have any questions or would like additional information.
This morning, U.S. District Court Judge Denny Chin sentenced Bernard Madoff to the maximum sentence of 150 years of prison for his role in a “historic” multi-billion dollar fraud.
Judge Chin stated “Here the message must be sent that Mr. Madoff’s crimes were extraordinarily evil and that this kind of manipulation of the system is not just a bloodless crime that takes place on paper, but one instead that takes a staggering toll.”
Mr. Madoff’s “error of judgment” or “tragic mistake” (as he referred to his fraud) devastated the lives of thousands of people. While it is unlikely that Mr. Madoff’s former clients will receive any significant restitution, it is comforting to see that he was not able to buy leniency and that the maximum sentence was ordered.
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