Stock Broker Failure to Protect Assets

[JGBech]

What is the name of your state? Florida. The broker is in New York.

For several years my IRA was invested with Prudential. As the market began to decline I approached my adviser who suggested that I fill out a PruChoice questionaire to determine my risk tolerance. I was 62 at that time and seriously concerned about protection of principal since I had planned to draw on the IRA in less than 2 years. I have reviewed the result of the questionaire and it listed the risk as Conservative(low risk) with preservation of principal.

In 2000, my Prudential adviser suggested that I put $55K in a Mututal fund, containing Gabelli, Invesco, Davis NY Ven Fda, Strong Opportunity funds, and several mid-cap and small-cap funds. Over the ensuing year I lost over $26K. I went to a new brokerage firm where they told me that those funds were much too high a risk given my age and short time horizon.

I have heard that people in similar situations have sued their broker for such blatant errors.

I believe that I have adequate evidence to pursue some form of recovery on this IRA. I will approach Prudential management with these facts. Any suggestions?

 

[ALawyer]

You bought in at the peak of the market euphoria in 2000 and as we all too sadly know the market fell. There is not enough money in the world to repay everyone their losses, and merely losing money is not a basis for claims.

I don't know what your entire financial situation was, or if the stock funds you bought were excessively risky for someone age 62 with your objectives. If the IRA consiituted you only assets in the world, perhaps there may be a claim in terms of lack of suitability, but my guess is that you held substaintial other assets (stock, pension plan, house, bonds, etc.) and the IRA funds even if invested in growth shares were a small portion of the total.

You could file a claim for arbitration, but my sense is you'd need a bit more than you set forth in the posting to prevail, and that your broker would say you and he discussed the risks and that's what you wanted.

 

[JGBech]

Thank you for your comments.

I failed to mention that I was told that brokers are directed to sell their "inventory", even at the sacrifice of their clients. I feel that I may have been "sacrificed" here!

Also, there is a syndicated NY Times' article in today's St. Pete Times in the Business section entitled "Wall Street could face an avalanche of claims". This article describes a situation, not unlike mine, where a person in his late 50's lost most of his IRA with bad advice. He went through arbitration and was awarded a substantial recovery sum.

My loss was nearly 50% of my only liquid asset. Now at 65 I find that we are unable to sustain ourselves on a dwindling IBM pension and Social Security. We are entertianing selling our only "real" asset, our home, in order to survive. And, I am seeking work.