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Investors Turn to Stockbroker Arbitration

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Charlotte, NCWhen a investor files a complaint against a stockbroker, the most common way of settling the dispute is through a process known as arbitration. Arbitration can settle cases in which an investor accuses a stockbroker of fraud, negligence, or other unethical activities that resulted in the investor losing money.

The National Association of Securities Dealers (NASD) oversees securities firms, establishes conduct rules and disciplines firms that do not follow the rules. Investors with complaints against their stockbrokers can file for arbitration with the NASD. In fact, most brokerage firms require investors to agree to arbitration in the case of a dispute. Although they may be leery of the NASD, investors are able to recoup their losses through arbitration.

stockbroker arbitrationSix people who lost money after buying bad investments from a financial advisor were awarded $872,496.32 by an arbitration panel. The award covers out-of-pocket losses plus interest, attorney's fees, additional costs, and the arbitrator's fee.

FSC Securities Corp., the firm that employed the advisor, is responsible for payment of the award because of its failure to properly supervise the advisor. According to an article in the JournalNow, the arbitration panel expressed serious concerns about FSC's conduct in the matter; "It said that FSC should have never hired Hollenbeck in the first place, and that it failed to warn Hollenbeck's investors that it had discharged him on May 17, 2002, for selling unauthorized investments."

Although the panel's decision is in relation to six investors there are over 100 other investors who may also recover their losses from the same advisor. In fact, the stockbroker made over $11 million in sales, receiving $2.2 million in commissions from bad investments. The advisor has been indicted on charges of mail fraud and conspiracy related to his recommendation of investments in Mobile Billboards of America, the same company alleged to be involved in a Ponzi scheme.

According to an article in The Plain Dealer two women in Ohio are accused of using "false and misleading statements to lure people into buying shares of a truck-mounted mobile advertising company." The scheme targeted older investors, asked for investments of $20,000 and promised an annual return of around 13.5 percent. However, investors were not compensated from Mobile Billboards of America advertising profits. Rather they were paid money the company received from new investors a practice typical of Ponzi schemes.

Some employers do keep an eye on the activities of their financial advisors, although they may not check up on their advisors as often as they should. One company, Raymond James Financial Services, noticed that a stockbroker made 155 unauthorized transactions on one account in four years, earning himself $16,331 in commissions. The account had an average value of $37,907. A regulatory complaint against the broker alleges that he "...mismanaged the account, made unsuitable recommendations, made trades without authorization and engaged in fraud by omitting factual information," according to the Seattle PI. The company also faces civil charges for failure to reasonably supervise the financial advisor.

If you have lost money due to unethical actions on the part of your stockbroker or financial advisor, contact a lawyer to discuss your options. New arbitration claims are constantly being filed. Check back here for updates on stockbroker arbitration...


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