The Public Investors Arbitration Bar Association – PIABA for short – claims that nine brokerage firms mislead investors by claiming or suggesting they have a fiduciary duty to their investors. They don’t. Anyone in the industry knows that brokerage firms are allowed to advance their own self interests and can even elevate their own interests above that of their clients.
Unfortunately customers of brokerage firms are never told this. It is the industry’s dirty secret. Worse, if the PIABA report is correct, several brokerage firms are committing investment fraud by misleading their customers and claiming otherwise.
PIABA members represent the victims of bad brokers. According to a report released last week, nine big brokerage firms are misleading clients. Those firms are Merrill Lynch, UBS, Berthel Fisher, Charles Schwab, Morgan Stanley, Allstate Financial, Ameriprise, Wells Fargo and Fidelity Investments.
Investment fraud costs billions of dollars per year. While no stockbroker can guarantee returns or profits, brokers should always do what is best for their clients. Unfortunately, this fiduciary standard isn’t the law. Instead, brokers only have to recommend investments that are suitable. There is a big difference between doing what is best and what is merely suitable.
If PIABA is correct, these 9 firms are telling customers that the customers’ interests come first but when faced with an arbitration demand, they suddenly say the opposite. Only after a claim is made do brokers attempt to escape liability by disavowing the fiduciary standard.
Financial Advisor magazine covered the PIABA report last week. Seeking the input of some of the 9 companies accused of wrongdoing, the magazine spoke with Fidelity Investments. A Fidelity spokesperson said, “Every day we look out for the best interests of our more 20 million customers, and we welcome any regulatory proposal that allows us to provide the investment assistance that the average investor needs.”
Assuming that report is accurate, Fidelity admits what PIABA has been saying; Fidelity Investments and the other named firms are lying when they claim that clients’ interests come first. We look forward to arbitrating a claim against Fidelity lest they try to retreat from the very high standard they want customers to believe.
The PIABA report is simple You can’t tell customers that the customer’s best interest comes first and later disavow that claim when a customer loses money. Unfortunately, investment fraud isn’t that simple. Until the SEC imposes a true fiduciary standard on stockbrokers, many will say one thing but do something else.
Investment advisers do have a fiduciary duty to clients and many charge fixed fee or a percentage of the portfolio amount. Stockbrokers, however, only have a duty to understand their customers needs and recommend suitable investments. That means as long as two investments are acceptable or “suitable,” a stockbroker can recommend the one that pays the highest commission. More money for the broker, less for the client and its all legal.
Stockbroker fraud is a billion dollar problem…. unsuitable investments, conflicts of interest, improperly executed trades and even theft. If you have been swindled by a stockbroker, investment adviser or other financial professional, talk to a lawyer concentrating in investment fraud. Most stockbroker cases can be handled on a contingent fee basis. Stockbroker cases are usually handled by binding arbitration.
Need more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). Minimum loss $100,000. Services available in many jurisdictions.
MahanyLaw – America’s Fraud Recovery Lawyers