Chicago60 wrote:Neuro: I did not interpret your reply as being antagonistic in any respect, and appreciate the thoughtful reflections. To answer your specific question, as you no doubt know (based on the substance of your response, it seems clear you are somehow "in the industry"), favorable settlements for customers against brokers generally are not publicly available unless one does a broker search on FINRA's website. Of course, FINRA reports customer claims against brokers, and the last statistics I saw, maybe a year or two ago, reported that 50% of customers win some type of arbitration award against the brokers. That statistic is almost meaningless of course, because each case falls or succeeds on its own merits, and some cases should never be brought. Further, a claim for damages of $100,00 and an award of $10,000 may not be a win in the client's eyes, but is a win in FINRA's. But, it does tell you that customers do succeed with the right cases, and not just the widows and orphan type cases you hinted at. Members of PIABA (Public Investors Arbitration Bar Association) no doubt also have this information. SAC Arbitration also has a sound database of successful claims against brokers.
You post prompted me to look up some recent FINRA judgement to look for fines and suspensions against individuals which fall into the "bad advice" category, as opposed to "fraud". Finra has a Disciplinary Action Report which you can find here: http://www.finra.org/industry/disciplinary-actions
It's very interesting, and I suggest that people take a look at the section about halfway through which applies to individuals, as opposed to firms.
Here are some examples of rulings for bad advice. The May report lists about 60 individuals who were sanctioned. Each quote below represents an individual ruling.
The findings also included that Erb recommended that a customer—a 74-yearold
retiree—surrender annuities and purchase approximately $147,000 in an illiquid, nontraded
real estate investment trust (REIT). Erb’s recommendation was unsuitable because
it was not consistent with the customer’s investment objective and risk tolerance, and
because it placed more than half of the customer’s liquid net worth in a single, high-risk,
alternative investment.
he recommended unsuitable
inverse and inverse-leveraged ETFs and exchange-traded notes (ETNs) (collectively, nontraditional
ETFs and ETNs) transactions to his customers. The findings stated that Elliott
recommended transactions in ETFs and ETNs that did not comport with the customers’
financial situations, moderate investment objectives and minimal tolerance for risk, as
stated on the customers’ account profiles. Elliott held several of these non-traditional ETFs
and ETNs in his customers’ accounts for periods as long as a month, despite the fact that
these products were short-term trading vehicles not meant to be held for extended periods.
Schober effected the annuity exchanges in the customers’ accounts and
designed these exchanges to benefit him at the customers’ expense. All of the annuities
that Schober exchanged were still in the surrender period. Consequently, the customers
paid total surrender charges of approximately $154,642 to sell their annuities. Additionally,
the customers paid sales charges of approximately $69,000, of which Schober received
approximately $65,000 in commissions, and incurred new surrender periods in connection
with their annuity purchases. Further, the annuities that Schober exchanged offered
comparable income benefits for the customers. Schober never disclosed the amount of
the surrender charges they would incur to sell their annuities, Nor did he explain the sales
charges associated with the purchase of the new annuities or that they would be subject
to new surrender periods. Schober effected the annuity exchanges without having a
reasonable basis to believe that such purchases and sales were suitable for the customers
in view of the nature, frequency, and size of the transactions and costs to the customers,
including the significant surrender charges associated with the trades. The annuity
switches provided little or no new economic benefit to the customers while providing
Schober with the new commissions. The findings also stated that Schober attempted
to conceal the unsuitable annuity exchanges by providing false information concerning
the source of funds on the annuity transaction documents he submitted to the firm and
annuity companies
The findings also stated that Escarcega made unsuitable
recommendations to 12 customers by failing to take into account their overall financial
situations and needs. The debentures were high-risk securities suitable only for investors
with sufficient financial resources who could afford to lose their entire investment. The12
customers were not such investors
So there were only 4 of 60 reported cases which dealt with poor advice. The remainder were all things such as fraud, forgery, taking loans from clients without permission, and various regulatory disclosure violations.
I'd like to now find cases brought against advisors/brokers where the client LOST, but for which many people would assume would not be permitted. But I'm not yet sure if FINRA provides summaries of cases which do not result in fines/suspensions. The May report from the link above does list 12 new complaints filed (which are pending decisions) and none of which would be considered the "advice" category.
