Money Manager "Guarantees" Violation of Law?

[Bastiat]

What is the name of your state (only U.S. law)? NJ

I hired a money manager a few years ago to manage a retirement account. Every month the money manager sends out an investment summary. Many times during this period, despite the standard disclaimers at the bottom of the report, he has "guaranteed" that a certain stock or the market would go up. he has said "many of our stocks can be expected to gain 200-400% in the next year" (turned out to be dead wrong of course). "I know exactly what to do" and many other claims of a similar nature almost every month. Foolishly I have relied on his claims and the account is down over 50%. Do I have a legitimate legal claim against this manager? Thanks.

[anteater]

..despite the standard disclaimers at the bottom of the report..

No.

Heck , look at it this way. If the "..account is down over 50%..", he is no worse than the market. Not a reason to pay the boob, but at least it does not appear to be worse than a monkey throwing darts.

[Bastiat]

Originally Posted by anteater

No.

Heck , look at it this way. If the "..account is down over 50%..", he is no worse than the market. Not a reason to pay the boob, but at least it does not appear to be worse than a monkey throwing darts.

Respectfully, I believe you've somewhat missed the point. If a professional money manager to whom you've entrusted your retirement savings tells you in a report that he "guarantees" that you will double your money or "guarantees " that an individual stock will rise 200% and makes similar pronouncements many times, is that condoned by the relevant registering agency or authority?

If I were building a house for you and put in writing in an email say, that I "guarantee" the house will come in at a specific budget level or time, do I bear no responsibility when the house takes a year longer or goes over budget by $250,000? Can I make any claim I feel like making as long as there is a little disclaimer at the bottom of my email in 2 point type that says "statements predicting the future cannot be relied upon...blah, blah"? It seems to me that at some point you have to be held responsible for your guarantees and promises, no?

[HomeGuru]

Originally Posted by Bastiat

What is the name of your state (only U.S. law)? NJ

I hired a money manager a few years ago to manage a retirement account. Every month the money manager sends out an investment summary. Many times during this period, despite the standard disclaimers at the bottom of the report, he has "guaranteed" that a certain stock or the market would go up. he has said "many of our stocks can be expected to gain 200-400% in the next year" (turned out to be dead wrong of course). "I know exactly what to do" and many other claims of a similar nature almost every month. Foolishly I have relied on his claims and the account is down over 50%. Do I have a legitimate legal claim against this manager? Thanks.

**A: I ask why you still do business with this idiot?

[HomeGuru]

The actions the money manager took is both unethical and illegal.
Read your state securities laws. Something you should have done several years ago.

[Bastiat]

Originally Posted by HomeGuru

**A: I ask why you still do business with this idiot?

I don't..I fired the guy last week but am contemplating legal action. I feel he made guarantees that he had no business making. He got paid for managing my money, this was not a free service, nor was I making the decisions to buy and sell.

[HomeGuru]

Originally Posted by Bastiat

I don't..I fired the guy last week but am contemplating legal action. I feel he made guarantees that he had no business making. He got paid for managing my money, this was not a free service, nor was I making the decisions to buy and sell.

**A: so you have all his representations ( and misrepresentations) in writing correct? Why have you not had a meeting with his boss and top VP/owners of the company?

[anteater]

Also respectfully, you keep mentioning that he "guarantees" something. But at the same time, you said that his newsletters have stated:

"...many of our stocks can be expected to gain 200-400% in the next year..."

"I know exactly what to do" and many other claims of a similar nature almost every month.

Those do not seem like guarantees to me. I have zero sympathy for the guy, but I doubt that you can stretch those newsletter statements into a case. Your account agreement probably requires you to go through arbitration first, anyway.

[Bastiat]

To answer the above two replies. First, it's the guy's own company. He does not work for a broker or any financial institution. He is a money manager. There is nobody in the company I can talk to other than this guy and I don't think he's about to volunteer to compensate me in any way whatsoever.

As for having a "guarantee in writing", is there a written agreement he signed where he said "I guarantee to double your money in two years" or something similar? Of course not. But if you receive monthly reports in which he makes statement such as those quoted above or how about "even if the stock market doesn't go up, we intend to make several hundred percent in the coming years. We are confident of that" Is this an iron-clad indisputable guarantee? No, but how am I supposed to interpret statements like these? Are they giving me reason for false expectations, do they border on a guarantee? Are they statements a registered money manager should be making?

[ShyCat]

Is this an iron-clad indisputable guarantee? No, but how am I supposed to interpret statements like these?

As a sales pitch, client-retention confidence booster, grandiose boasting, whatever, but no reasonable person would read those as guarantees.

Are they giving me reason for false expectations, do they border on a guarantee?

No.

Are they statements a registered money manager should be making?

That a certain gullible person read "guarantee" in place of "intend" and "expect" does not make those particular words suspect.

[anteater]

First, it's the guy's own company. He does not work for a broker or any financial institution. He is a money manager. There is nobody in the company I can talk to other than this guy and I don't think he's about to volunteer to compensate me in any way whatsoever.

If he is managing money, he is supervised/regulated by somebody - the SEC, the state, a broker-dealer, etc. Read over your account agreement closely.

I still don't think that you have an actionable complaint, but if you are determined, go for it.

[I_Got_Banned]

I agree with the general consensus that has been offered here. However, if you choose to pursue this further, your first step is not going to be legal action against this individual (which, as mentioned previously, would more likely be through arbitration). Your first step will have to be a clear determination by a governing body (NASD, NYSE, SEC... etc) as to whether these statements/publications which you claim to have mislead you, can be reasonably classified as "Guarantees" which we all know would be highly inappropriate & possibly illegal for an investment professional to distribute to clients regarding any investment in the stock market.

Barring that, you claim has very little merit if any...

Chances are, and although you think this guy works alone, and considering the amount of scrutiny that the average investment professional is placed under, my guess is that he has to answer to a compliance manager who has granted him the sort of regulatory approval classifying his publications as compliant with the market's rules and regulations.

With that out of the way, its interesting how people stick with what they think might be inappropriate when things are going alright. Then when it all heads southbound... That's when they cry foul!