Securities Case Examples

Below are factual scenarios from a few of the cases we have handled over the years . Cases are generally filed as arbitration claims with the Financial Industry Regulatory Authority (FINRA) and typically resolved in 12 months. Most cases handled on a contingent fee basis which means that you only pay attorney fees if  we are successful.

Case 1: UNSUITABLE INVESTMENTS A couple that had recently retired to South Florida opened an account with just over a million dollars. These funds represent their life savings and nest egg upon which they relied for living expenses to supplement their Social Security income. Their broker recommended unsuitable investments which over the course of a few years caused the account to lose nearly $400,000 in value. On their behalf we filed an arbitration claiming that the investment advice given was unsuitable and the cause of their losses. As  mediation just prior to the beginning of the final arbitration hearing, in a confidential settlement, the case was resolved for $350,000.

Case 2: CHURNING IN ACCOUNT OF ELDERLY LADY IN NURSING HOME An 89 year old widow who suffered from dementia lived in a nursing home outside the state of Florida. Her broker was a young, inexperienced broker who worked for a nationally known brokerage firm in Boca Raton. Over the course of one year the account declined in value from over $500,000 to $15,000. The expert we hired on the client's behalf prepared an analysis of the account and we learned that there were hundreds of unauthorized trades, primarily in technology stocks, that caused loss of nearly the entire account. During the course of the investigation, it was discovered that the broker had a substance abuse problem and was going through a divorce at the time of the unauthorized trading. He churned the account to generate commissions and increase his income in order to fund his property settlement. In a confidential settlement, the case was resolved when the broker's employing firm agreed to pay $650,000.

Case 3: BROKER HIDES THEFTS BY MAKING PHONY STATEMENTS Claimants had a brokerage account with a large nationally known brokerage firm. Over the course of 3 years their broker, who was married to a family member,  made unauthorized trades and unauthorized transfers of securities and monies to his own personal accounts. To disguise the fraud the broker prepared fake monthly statements. He changed the address on the account so that the real statements were mailed  to an address he controlled and destroyed them each month. In a confidential settlement, the case was resolved with the firm agreeing to pay nearly $2 million dollars.

Case 4: OVERCONCENTRATION OF SINGLE STOCK Claimant had a large concentration of stock in a single company (a company started by her grandfather). Ownership of this stock is the client's only experience investing and this stock represented nearly 100% of the client's total liquid net worth. Seeking investment advice, the client turned to a major broker dealer for financial advice and the idea of diversifying her large position in the one stock. The Broker dealer set up the account but failed to diversify the portfolio as promised. Shortly after opening the account, the stock price fell dramatically and the client lost a large percentage of her net worth. The case was settled for $950,000 at a mediation just prior to the beginning of arbitration.

Case 5: GROUP SOLD HIGH RISK INVESTMENTS A group of over 80 investors’ retirement funds were invested in risky and unsuitable derivative investments known as collateralized mortgage obligations, "CMO's." The broker convinced the group of mostly retired investors that these investments were suitable for them, however the investors quickly lost most or all of their invested funds. Unbeknownst to the investors, not only was their money invested in unsuitable and risky mortgage derivative investments, but the unscrupulous broker generated millions in undisclosed commissions for himself (by way of hidden markups and markdowns).  A confidential settlement was reached just prior to final hearing for nearly $6 million dollars.

Case 6: BAD ADVICE FROM BROKER INDUCES WORKERS TO RETIRE EARLY We represented a group of more than 25 blue collar workers from the midwest who were convinced to retire at early ages, ranging from 53 to 60 by their broker who worked for a large national independent brokerage firm. The broker led the individuals to believe that by retiring and turning over their company 401K accounts to him, they could earn sufficient income to fund retirement. In reality, the broker sought the 401K accounts so that he could immediately liquidate them and invest the proceeds in annuities, private placements, real estate investment trusts (REITs) and other unsuitable investments, thereby generating large commissions for the broker and his firm. In a confidential settlement, the brokerage firm paid nearly $1 million dollars.  

Case 7: COUPLE IN THEIR 80'S SOLD UNSUITABLE ANNUITY- A South Florida couple in their 80's were told by their broker that she would reallocate their 401k investments to 'get them some income'. The husband at the time suffered from several terminal illnesses, was only marginally competent and had a life expectancy of less than a year. After meeting with the broker and signing some documents, they learned several months later that the broker had liquidated 90% of their 401K accounts and purchased annuities for each of them. After receiving just 4 payments, the husband died. Under the terms of his annuity the surviving spouse was to receive 75% of the monthly amount payable to the husband. The wife would have to live to nearly 100 years of age just to recoup the original cost of the annuities and if cash were needed for health or living expenses, there were substantial penalties for the first four years. This was a completely unsuitable recommendation for these clients and one that only benefited the broker and the firm,  as a result of the high commissions charged. The case was resolved prior to final hearing with the firm reimbursing the amount paid for the annuity. 


Robert H. Rex, Esq.
Rex Securities Law
Dickenson Murphy Rex & Sloan

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