Broker Impropriety & threats

[failenn216]

What is the name of your state? N.J. My mom, age 86, had an account with a major national brokerage firm for years. However, they have only a small, 4-5 employee office in the unpopulated area where she lives.

Last year, she claims that her broker switched her to a Margin Acct. without her authorization. She claims she has never held a margin acct. and says she would never authorize this. She is not very knowledgable about investing, but in the type of acct. she had, she received no investment advice. She later decided to close her account and move her money to another brokerage house, which was closer to her.

One of the partners of the first firm then came to HER HOUSE, and told her she owed $3000 from margin trades, and threatened to call the police & have her arrested if she did not pay up then and there. My mom lives alone, and being 86, was so afraid of this man, she wrote out a check for $3000. There were no witnesses.

Assuming she did not authorize the margin acct. , what cause(s) of action does she have against this brokerage, both under general law and SEC, and what are her time limits? What is the first step I should take to help her..I don't know what proof to ask for.. Thanks

 

[ALawyer]

The conduct described would be outrageous and possibly constitute elder abuse, apart from securities fraud.

Merely having an account denominated as a margin account is not itself a usual basis for a claim or problems -- and that alone would not cause her to owe a claimed $3,000. BUT my guess is that the brokers looted her account, made a series of unauthorized trades made in her account without her knowledge or consent, the securities purchased were likley highly inappropriate and should not have been purchased for her, and there may have also been churning to earn commissions or spread.

If she wants to get her money back -- and the firm is still in existence -- the first steps may well be to immediately write a coherent letter fully describing exactly what happened to the firm's compliance director on behalf of your mother and show and send copies to the regional office of the US Securities and Exchange Commission, the NASD, the State Securities Commissioner, and if the firm is an NYSE member, to the NYSE.

The compliance director of any legitimate firm would likely look into it immediately, and if the problem was that your mother was dealing with a bad broker or registered rep or "customer's man" at an otherwise good firm, the firm would fire the broker and make amends. If not, you could then file a request for arbitration with the NASD and if the facts are as you claim, she'd almost certainly win. HOWEVER if the brokerage firm itself was a corrupt boiler room, then that's how they did business and the firm will try to deny everything, delay and eventually go or be put out of business by the SEC.

It is hard to advise you as i do not know the facts and do not practice in your state, but it may pay to se a lawyer. It's probably not just the $3,000 -- but a lot more taken from her account by crroks who preyed on a little old lady.

 

[failenn216]

Thank you ALawyer. I believe your suspicions are correct about this broker looting this account; but my mom is clueless about the handling of her investments and does not have many facts for me to go on. AND, have you ever noticed how difficult it is to read the statements from the big brokerages?? They are impossible to figure out!!

I am grateful that your response has given me a starting point, and I do have the addresses of the NASD, SEC etc. She has tried to find an atty, but no one will take the case--they all say it would cost more than $3000 to handle it. I am trying to find out if she may even be eligible from her local Senior Citizen Legal Aid. I will follow the steps you have indicated and let you know the outcome. Thanks again.