Kemp Klein

Investment Losses - Arbitration May Work For You

If it were just the bumps (actually cliffs we all fell over) in the market that caused us to lose substantial sums of money that would have been devastating enough but when those losses occurred in broker recommended investments that you now see you should have never been in at all, you feel foolish, outraged and cheated.


Not only the PONZI schemes by local sleaze balls, but many of the complex products foisted off on you by especially the larger brokerage firms, were promoted as “being offered only to our best clients.” So if you were unlucky enough to be one of those “best clients” you were presented with several unique investment opportunities that promised returns higher than almost anywhere else available. You were also presented with the story-line that these investment products were among other inducements, “safe, secure, guaranteed, little risk, the same as treasury bills or certificates of deposit, rated “Triple A.” With those kinds of promises/representations by your trusted investment advisor, broker or financial planner (who not only “plans” but sells you products on which she makes commissions), you probably felt pretty confident your principal would not be at risk at all or even if you understood there could be some risk, it was quite insubstantial.


Since there were, and still are, a plethora of “investment” products being offered, you understandingly had to rely on presentations by your investment advisor or broker sometimes in the form of “sales presentation memos.” The memos provided simplistic explanations, down-played risk and emphasized promised returns, whether it be in the form of current income or promised or implied capital appreciation.


However, upon the first sign of market dislocation, many of those complex and inexplicable products, immediately lost value, often times very substantial diminution. We look back now with our admittedly 20/20 rear vision and realize these products were neither safe nor secure. Their risk profiles were completely misstated, misrepresented or in the case of the broker who was just passing along squibs from his firm’s sales script, negligently or recklessly presented because he really had no idea himself about how the product was created and what risks it actually carried.


So where does this unenviable circumstance leave you? How do you go about attempting to get some satisfaction? It isn’t merely revenge when you’ve been mislead, its justice. You’ve lost a good deal of the value of your savings, your children’s educational funds, your retirement and your trust in anyone. An answer, and no answer is totally perfect, is arbitration, a process that usually works out to be less expensive, less technical and less intimidating. The Financial Industry Regulatory Authority (FINRA) is a non-governmental agency that administers the arbitration program. The program requires brokers and their unhappy customers to arbitrate rather than go to court. Rather than being heard in an imposing courtroom, a hearing is held in a conference room. The arbitrators will hear each side without the technical rules that apply in court, and will try to do what is fair. It is a process that might help you
recover some of your losses.

For questions about this contact us at Kemp Klein.