FAQs

Question: If a customer's portfolio has gone down in value, does he/she have a cause of action against the broker and brokerage house?

Answer: Not necessarily. It depends on a number of factors, including the substance of conversations between the parties, the suitability of trades for the customer and the allocation of funds within the account.

Question: Does a high level of trading in the account create a cause of action against the broker and the brokerage house?

Answer: Again, the answer is not necessarily. It depends on the trading strategy or strategies that the customer desires for his/her account, who placed the trades, what authority was given to the broker and the trading patterns in the account.

Question: Are there ways to review the background of a broker or a brokerage house?

Answer: Yes, the Financial Industry Regulatory Authority ("FINRA") has information about the disciplinary history and lawsuits filed against brokers and brokerage houses in the securities field (finra.org) and the National Futures Association ("NFA") has the same information for commodity futures brokerage houses and brokers (www.nfa.futures.org).

Question: Should trading begin in an account without first having signed account agreement papers?

Answer: No, without written agreements between the parties, there are unanswered questions about the parties relationship to one another. This could lead to many misconceptions between the parties about their duties and obligations. It also calls into question the credibility of the party that does not wish to enter into a written agreement.

Question: What should a client do if he/she thinks that his/her broker has not been completely honest?

Answer: Anytime a customer feels uncomfortable about the veracity of statements made by his/her broker, he/she should not ignore the situation. Options include questioning the broker about the statements or verifying them with the broker's supervisor or a third party not associated with the brokerage house (a knowledgeable attorney, financial advisor or accountant). Delaying taking action against a broker who commits wrongful acts could cause a customer to waive valuable legal rights against the broker and the brokerage house.