The issues below were developed over many years of teaching, acting
as an arbitrator and financial planner, and as an expert witness.
Consumers, attorneys and arbitrators will find many of the comments
helpful when facing potential unsuitable investments and irresponsible
brokers.
You might also take a look at just a couple of the letters I have
written to the NASD regarding inadequate arbitrator training. I had attempted
for many years to get the powers to be to recognize the lack of training
at the licensing level and to at least institute definitive training for
arbitrators. I even submitted material for the 1996 NASD Arbitrator Reform
(you'll see my name in the back). No success. Nonetheless, the issue of an
understanding of the factors influencing securities application is
mandatory if the industry is to truly provide adequate service to consumers-
before the sale or thereafter in a dispute. That's even why I called my course
for attorneys, "Practical Investment Theory and Application".
Addressing a problem after the fact rather than trying to resolve
the problem up front is a lot of wasted effort and a fraud upon the public.
Lastly, as of 3/99, "John Ramsay, deputy general counsel for NASD
regulation, says the basic information the brokerage (firm) gets on
a (customer) form is usually only enough to make suitable recommendations
for the simplest of mutual fund investments. For anything more complicated,
an investment adviser would be expected to know much more about the
customer."
| If you need assistance/professional analysis on the
purchase of an unsuitable investment- either as a consumer or attorney- please
call me at 510 352-4127 or Email to
discuss further. |
From a defendant on a very involved merger case: "To anyone who is
considering using the services of Errold Moody as one's expert for testimony
or reporting, I recommend him without reservation. First of all, he is a
compassionate and caring person who is part-teacher, part-analyst,
part-scientist, and expert at the art of synthesizing accurate conclusions
that make sense. He is a good listener who is able to integrate other experts'
research and opinions in support of his client. In summary, I cannot recommend
him highly enough."
and
"Mr. Moody. It's been a little over a year now and I am doing just
fine and wanted to write you and again thank you for your help and guidance
in my case with American Express. I just wish there were more people like
you around today. You're one in a million."
From an attorney regarding my report for the Bankruptcy Appellate
Panel Review, "Errold, thanks very much for your excellent analysis, which
is extremely helpful".
Regarding an expert witness case: "Once again, thank you so much for
your help with my brothers suit against American Express. Without your guiding
hand and involvement, things would have turned out far differently. He seems
more at ease and enjoys life so much more, now that all of that is behind
him. You made it all possible."
Click to Buy it now!
Sample
Pages
No
Nonsense Finance eBook
The list below includes all articles and specific links in alphabetical
order with accompanying description. The listings in the column to the right
are separate sections for articles and links.
AMERICAN ARBITRATION ASSOCIATION LINK:
has information about mediation, arbitration and other forms of alternative
dispute resolution (ADR)
ARBITRATION LINK: An attorney
provides some insight to the various issues of claims against a broker. But
as with all legal "insight", attorneys still do not have a clue to
diversification and the element thereto for risk and unsuitability.
ARBITRATION AWARD
LINK: Then click on "SAC’s arbitration awards library" You can see
how an actual case was decided.
ARBITRATION CASE
FLOW LINK:
ARBITRATION
EXPERT LINK: What is the purpose of an expert in mediation and arbitration
by Roger Dietz.
ARBITRATION
FILING FEE CALCULATOR LINK: The NASD provides this fee calculator
to help parties determine the filing cost of their claim. Parties should
use the calculator to avoid delays in the process due to potential filing
fee deficiencies.
ARBITRATION HEARING LINK:
Just What Happens at an Arbitration? By Mark J.
Astarita, Esq. Good insight- though I do not agree with his separate comments
about broker responsibility.
ARBITRATION PROCESS
LINK: This site by attorney Mark Astarita gives a good overview of how
an arbitration works including the underlying laws, prehearing discovery,
rules of evidence, awards, etc. But from personal experience, I would say
that arbitration is only as good as the insight and knowledge the arbitrators
bring to the forum- and it ain't that good. As with the brokerage industry,
none are required to know alpha, beta, correlation, diversification, standard
deviation and the other elements of investment basics. Further, again from
my experience, the attorneys don't have the foggiest idea of what they are
either. So the cases are developed only partly on the issues of suitability
and proper application and a lot on miscellaneous issues that can cloud the
real reasons for losses. That said, don't assume that all the brokers
are in error- many clients refused to do any homework as well so blame needs
to be allocated in many instances. Nonetheless, the NASD, NYSE, PSE, etc.
should be required to provide training courses on security application. I
have tried to force them to recognize such fiduciary responsibility, but
to no avail.
If you want to avoid arbitration, don't use people you TRUST to do
investing- at least as the major requirement. Read Who
Can You Trust first.
ARBITRATION
STATISTICS LINK: All the things you need to know before you file.
Actually, before you buy anything from a broker.
ARBITRATORS
REFERENCE GUIDE LINK: Talks about what it takes to become an arbitrator
etc. But not one word about knowing what they are talking about. If you do
not know diversification by the numbers, you do not know anything about
investing.
ARTICLES
ASSET ALLOCATION: Different than
diversification. Statistical/real life evidence as to how it works
ATTORNEY
CONTINUING EDUCATION LINK: It shows the Connecticut is a voluntary
state. Let's be careful out there!
AWARDS: The split of responsibility between the
agent and the firm. Not as clear cut as you would imagine.
BAD ARBITRATION: Comments by attorney
Richard Skora. Excellent analysis
CHURNING: Basic definition and some adjustments
in thinking.
CLASS ACTION LINK: This
alphabetical database keeps you posted on the latest class-action proposals,
and even provides a way for you to join them.
CODE OF
ARBITRATION PROCEDURE LINK: Includes the NASD's Rules governing the areas
of Arbitration and Mediation.
CONDUCT: Lots of problems and inconsistencies
with arbitrators. Many do not understand the fundamentals of investing.
DIVERSIFICATION: What constitutes
proper diversification with investments. How many stocks must you have in
order to insulate a portfolio due to unsystematic risk. Mandatory information
before anything is purchased.
EXPERT
WITNESS CODE OF CONDUCT LINK:
EXPERT WITNESS
QUALIFCATIONS: An attorney describes the four areas needed
to be an expert
FIDUCIARY RESPONSIBILITY: Brokers do
act as fiduciaries or at least as semi-fiduciaries. They should be held to
higher standards than the basic prudent man rule.
FRAUD LINK: Quatloos.com is
a public educational website covering a wide variety of financial scams and
frauds, including wacky “prime bank” frauds, exotic foreign currency
scams, offshore investment frauds, tax scams, “Pure Trust” structures
and more.
INVESTOR ADVISOR LINK: You
can search for an investment adviser firm on this website and view that
firm’s Form ADV. Investment advisers file Form ADV to register with
the SEC and/or the states. Form ADV contains information about an investment
adviser and its business operations. Form ADV also contains disclosure about
certain disciplinary events involving the adviser and its key personnel
LAWYER
LINK: While the site covers all lawyers nationally, I am focusing on
its ability to locate securities attorneys in a specific area. That said,
the easiest way to determine if they are any good is to first ask what
diversification is. Next, be sure
they have a financial calculator because it is
mandatory that one understands how money works.
LAWYER
REFERRAL LINK: American Bar Association
MARGIN ACCOUNTS: How they work with some
examples. You have a chance for extra returns, but you unquestionably take
on higher risk. I have seen people use this when they had no reason for even
being in the market.
MEDIATION LINK:
Instead of NASD arbitration.
MONITORING ACCOUNTS: What is the
responsibility after an investment is made? After 3 months, 3 years?
NASD LINK: This page lets
you review potential changes in the laws, get material about your brokerage
firm and agent, etc.
NASD ARBITRATION BROCHURE
LINK:-- information from the NASD summarizing the process of broker
arbitration.
NASD MANUAL LINK
NATIONAL ASSOCIATION FOR COMMUNITY
MEDIATION LINK
THE PLAYERS: What are the backgrounds
of the brokers and agents. You'll be surprised.
PRUDENT
MAN RULE LINK: The Uniform Prudent Investors Act was completed by the
Uniform Law Commissioners in 1994. This act removes much of the common law
restriction upon the investment authority of trustees of trusts and like
fiduciaries. It allows such fiduciaries to utilize modern portfolio theory
to guide investment decisions. A fiduciary’s performance is measured
on the performance of the whole portfolio, not upon the performance of each
investment singly. The act allows the fiduciary to delegate investment decisions
to qualified and supervised agents. It requires sophisticated risk-return
analysis to guide investment decisions.
RISK: Basic definitions that must be known
by all investors BEFORE investing.
SECURITIES
ARBITRATION STATISTICS LINK: Arbitration, mediation, types of cases,
closed cases and more.
SECURITIES CLASS ACTION CLEARINGHOUSE
LINK: This site by the Stanford Law School and has some good info on
securities class actions, pleadings and more.
SECURITIES CLASS ACTION
DESIGNATED SITE LINK: A public site by class action attorneys that provide
info on current cases and more. Good insight to certain securities transactions
and violations.
SECURITIES EXCHANGE COMMISSION (SEC)
LINK: Get info on bad agents, access to EDGAR database and more.
SECURITIES
FIRMS CRD LINK: NASD provides CRD numbers for all
registered securities firms. You will need these if you file against a
firm.
SECURITIES FRAUD AND PROTECTION
LINK: This site by a Massachusetts attorney has some good articles explaining
the concepts of broker duties and responsibilities and what to do if
you believed you have been defrauded. He does note that "Brokers are held
to certain standards of the securities industry and must pass various
examinations in order to be licensed." While true, he- and literally all
other attorneys- still miss the point that licensing has NEVER provided any
of the fundamentals of investing and therefore was never intended to protect-
even really help- investors to begin with. Do your homework up front
so you won't have to use arbitrations to try and get some of your money
back.
SECURITIES
LAW LINK: This site contains up to date information about arbitrations,
changes in the law and a lot more that is valuable to consumers and professionals
involved in industry disputes. I don't necessarily agree with some of the
interpretations- suitability for example- but there is sufficient viable
material that is cause for review.
SECURITIES LITIGATION LINK: A Price
Waterhouse site designed to provide info to the legal and business
community.
SELF REGULATION IN TODAYS SECURITIES MARKETS LINK: An analysis of how it occurred
and what is gong on now. Professional article. Very good
SETTLEMENT:
This is my report against a CFP in Florida that
resulted in a significant settlement- even though the CFP Board of Standards
had provided him a full exoneration.
SOPHISTICATED INVESTOR: Very
few investors are sophisticated. Very few brokers are sophisticated.
STATE SECURITIES REGULATORS
LINK: Though I doubt that a one knows
diversification
SUITABILITY: The NASD rules
indicate that an investment must be suitable for a client. But how can anyone
determine such suitability if they are not grounded in any of the fundamentals
of risk and reward? I submit that they cannot.
UNIFORM
PRUDENT INVESTORS ACT LINK: Objectives of the Act. UPIA makes five
fundamental alterations in the former criteria for prudent investing. All
are to be found in the Restatement of Trusts 3d: Prudent Investor Rule.
(1) The standard of prudence is applied to any investment as part
of the total portfolio, rather than to individual investments. In the trust
setting the term "portfolio" embraces all the trust's assets. UPIA §
2(b).
(2) The tradeoff in all investing between risk and return is identified
as the fiduciary's central consideration. UPIA § 2(b).
(3) All categoric restrictions on types of investments have been
abrogated; the trustee can invest in anything that plays an appropriate role
in achieving the risk/return objectives of the trust and that meets the other
requirements of prudent investing. UPIA § 2(e).
(4) The long familiar requirement that fiduciaries diversify their
investments has been integrated into the definition of prudent investing.
UPIA§3.
(5) The much criticized former rule of trust law forbidding the trustee
to delegate investment and management functions has been reversed. Delegation
is now permitted, subject to safeguards. UPIA § 9.
LETTERS REGARDING LIMITED ARBITRATOR and PLANNER TRAINING:
NASD/John Pinto,
NASD/Deborah Masucci
NASD/David Ruder
The
SEC pdf'd my letters to them in September of 2004 regarding the legality
of financial planners
CFP Board of Standards regarding ineptness and
fraud
My
letter regarding securities petition on arbitrator reform
|
Securities Arbitration and
Litigation