Stockbroker Arbitration: Senior Not Handled With Care

Sacramento, CAIt is one thing to purposely invest in the stock market, but it is another thing entirely when you are a victim of stockbroker fraud—when you have been invested in the stock market without realizing it. Diane S. (not her real name) says her mother-in-law had no idea she was invested in the stock market, until she lost a lot of money. Now, Diane's mother may have to turn to stockbroker arbitration to recover her lost funds.

"My mother and father-in-law were in the military and, as such, they moved all over," Diane says. "When they were located near the Travis air force base they joined the military-based credit union, which was initially limited to people in the military. They've been with that credit union since the early 70s. My father-in-law took care of all the finances, but he passed away several years ago.

"Because he worked at an oil refinery after being in the military, he had an IRA account not at the Travis credit union. When my father-in-law passed away, the IRA went to my mother-in-law. She retired from the school district and had a small retirement account. She got a percentage of what was left of his retirement—about 55 percent or so. Her only other retirement money was what came in from social security.

"When she finalized my father-in-law's account, she transferred the money to the credit union, where she was comfortable and where she did all her banking. She was approached by someone in their financial services division when she opened the IRA account at the credit union. She did not seek the financial services division out; she was just depositing her money in the credit union. The financial services division approached her.

"She can't explain how it took place, but my mother-in-law was rattled when she discovered that the whole account was deposited in at least a medium-aggressive stock account. She ended up with all her money in there. She got a statement from September that showed her account was down by 40 percent, from $69,000 to $54,000. She showed me the statement and asked what happened and I said, 'Well, all your money is in stock.'

"She said, 'I didn't want to do that.' She's older and she does not understand financial issues. It's almost to the point that, if one more thing happens, we may have to intervene. She is illiterate in financial matters. By the time she got her next statement, she was down another $11,000. She wanted out of it that day, but by the time the transaction was done, she was down another $1,700.

"I asked if the financial advisor questioned her about her goals, but she says he did not ask her that. She said she just wanted maximum interest—she was unaware that her entire account was placed in stock.

"She is 72 years old and is totally retired. As her advisor, it was up to him to size up her circumstance, not put her into an aggressive stock. Somewhere, somehow, she wasn't handled with care. She didn't know what she was doing. The first thing she said to me was, 'It was my credit union, I thought I could trust them.' I don't think the financial advisor had her best future interests at heart because the account doesn't make sense for her.

"We went back to the credit union, but they were no help. All they said was, 'We have nothing to do with that; you can't blame us.' They rely on that financial division to get clients, but want nothing to do with it when something goes wrong.

"Be careful if you've had a death in the family and the non-financial person is left with the money. These banks have become so aggressive and that generation does not understand how aggressive they have become. That older generation is trusting and are victims of these aggressive sales people."