by Brian Mahany
“One day is fine, next is black
So if you want me off your back
Well come on and let me know
Should I stay or should I go? …
If If I go there will be trouble
An if I stay it will be double… Should I stay or should I go…”
Those are the words to the hit song of the same name by the Clash. They also describe FINRA’s new suitability rules for stockbrokers.
The FInancial Industry Regulatory Authority (or FINRA) is the organization charged with protecting investors and maintaining integrity in the stock market. Since it has come into existence, FINRA has mandated that stockbrokers know their customer and only recommend suitable investments. Before recommending a stock or other security, brokers must further understand their client’s age, investment experience, risk tolerance and any immediate needs for capital.
A young couple interested in a speculative investment and not needing their money for many years may be an ideal candidate for risky options transactions. It would be inappropriate to recommend a thinly traded REIT with no right of redemption, however, to a 75 year old widow who plans on retiring within a year and needs the money to live. In other words, what works for one investor may be a terrible idea for another. These rules are called suitability rules.
Historically, these rules have applied to the initial purchase of the stock or investment. Recently, however, FINRA has said that stockbrokers should also be responsible for strategy advice and specific advice on whether to hold an investment or sell.
While some brokers say that the new suitability guidelines are nothing more than rules looking for a problem, we agree that investors need more protection. In our opinion, a broker dealer’s responsibility simply doesn’t end once the investment decision is made. Although no stockbroker or investment adviser can guarantee an investment, the duty to one’s client continues whenever a client seeks advice.
We know of investors who were seemingly defrauded and given bad advice on both ends of the transaction.
If you were given bad advice by a stockbroker, registered rep or investment adviser, you may be able to recoup your losses. Stockbrokers in particular are regulated by FINRA. If you received inappropriate advice or recommendations, arbitration may be the fast and simple way to get back your money. Most FINRA arbitrations are resolved in a year or less.
Although FINRA’s filing fees are steeper than court, most lawyers specializing in stockbroker fraud cases charge a contingent fee meaning they receive a percentage of what the recover on your behalf. The turnaround time from filing to final verdict is also much quicker. Under a contingent fee arrangement, if the lawyer doesn’t recover money for you, he or she doesn’t get paid. That is a strong incentive for the lawyer to work hard on your behalf.
The stockbroker fraud lawyers at Mahany & Ertl can help you with a wide variety of claims against broker dealers including violations of FINRA’s suitability, churning and know your customer rules.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Detroit, Minneapolis, Portland, and San Francisco. Services available in many jurisdictions.