EVALUATION OF A POTENTIAL CASE

The most important aspect to any securities controversy is determining if you have the basis for an action against the broker and/or brokerage firm. No one has the right to commence a case accusing a broker or a firm of wrongdoing unless you can demonstrate that you have been wronged by the intentional or unintentional conduct of a broker or firm. This evaluation phase should not be taken lightly. In order to complete the evaluation you should 1) analyze the documents and 2) know your chance of success.

Analyze The Documents

1) Gather and review your monthly statements, trading confirmations, subscription agreements, correspondence with the broker or firm, and literature about the firm. You will need to request additional documents from the firm such as opening account forms, customer agreements and margin agreements, etc.

2) Draft a detailed narrative of events. Be sure to include dates and a description of how you met the broker.

3) Organize the documents you can produce to substantiate your claim against the broker or firm.

4) Ask yourself, " What will the other side say about my story?"

KNOW YOUR CHANCE OF SUCCESS

The following are the most common cases brought by investors and one case usually involves more than one of these issues:

* Unsuitability
* Misrepresentations and Omissions
* Unauthorized Trading
* Breach of Fiduciary Duty
* Order Failure
* Churning
* Failure to Supervise
* Unregistered Broker or Security
* Price Manipulation
* Option Accounts
* Margin Accounts and Over-Leveraging
* Forgery
* Frontrunning

Unsuitability

When an investment was inconsistent with the customer's investment objectives and the broker knew or should have known that is was inconsistent, the issue is suitability.

For example:

* The client's investment objective was contrary to the type of investment solicited and transacted by the broker (e.g. a speculative trading strategy for a client whose investment objective was safety of principal). Caution: In hindsight, it is tempting to claim that your stated investment objective was safety of principal, although it may be stated otherwise on the new account forms or you may have signed an options agreement. Remember, even if you do not have copies of these documents in your files, the broker and/or the firm will.

*You didn't know or understand the risks of loss involved in a particular investment. Again, examine in-depth your investment background; recall what inquiries you made of the broker with respect to risk. Many people plead ignorance when an investment goes sour. Given your educational and investment background, together with your general level of sophistication, assess the likelihood that a neutral party will be convinced that you were truly in the dark with respect to the risks involved in the investments.

*You didn't have the financial ability to bear the potential risks. The 87 year old widow whose only means of support is social security and who lost the proceeds of her husband's $20,000.00 life insurance policy to an unscrupulous broker will gain far more sympathy from an arbitrator than the M.D. suckered into losing $10,000.00 on pink sheet stocks. A broker has an obligation not to recommend securities that are unsuitable for a particular investor. A customer also has an obligation to be truthful in providing information to the broker at the time the account is opened. More than once, a customer has overstated his net worth or income in an effort to convince a broker that he is a valuable customer or suitable for a particular investment, only to have those misrepresentations thrown back at him during an arbitration.