Question of the Day: "What recourse do we have if my mother’s broker inappropriately invested her life savings in risky investments and the value of these investments has decreased by 50% over the last couple of years?"

Answer:  A securities brokerage firm and its brokers have a duty to only recommend investments which are suitable for a customer in light of the customer’s objectives and individual circumstances. This is known as the “suitability doctrine.” Specifically, the Financial Industry Regulatory Authority (“FINRA”) rules state:

In recommending to a customer the purchase, sale or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs.”

Where a senior’s life situation dictates a conservative investment approach and a broker recommends high risk investments not designed to preserve the senior’s financial resources, the senior can have a suitability claim against the broker and his or her employer for damages. 

It’s likely your mother signed an arbitration agreement when she opened her brokerage account  and gave up her right to file her case in court.  Therefore, your mother needs to file an arbitration claim to recover her money. Nearly all arbitrations are conducted by arbitrators appointed by FINRA. 

Let me know if I can be of further assistance to you.

J. Michael Bishop, JD
Smiley Bishop & Porter, LLP
Atlanta, GA  30338
Member of the national ElderCare Matters Alliance

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