Take Action Against Unscrupulous Brokers


Take Action Against Unscrupulous Brokers

There are several steps you can take if you're a victim of unsuitable investment sales or trades.

My 92-year-old mother's broker sold her million-dollar portfolio that had income-producing stocks and bonds and instead bought assets that were suitable for growth. The changes also resulted in a large capital-gains tax bill. Every accountant, financial planner and broker I have spoken to finds it difficult to believe that someone would turn a predominantly income-oriented portfolio of an elderly person into a growth portfolio all in one tax year. It's almost a given that the financial needs of a person that age would only increase, which indeed is the case with my mother who now requires 24-hour care. I would appreciate any resources or thoughts you might have about what to do about this.

I'm very sorry to hear about your experience with your mother's broker. From the information you've provided, it sounds like you do have a strong case against the broker for unsuitable investments.

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A good first step would be to contact the securities regulator in your mother's state. Some regulators have become very active in helping seniors who have been the victims of unsuitable sales or trades. In some cases, they've been able to put pressure on the brokerage firm to try to get some money back. If that doesn't work, they can at least start an investigation and levy penalties if they find out this is a problem at the firm.

The North American Securities Administrators Association, the organization of state securities regulators, has a Senior Investor Center, which includes a lot of great information specifically to help seniors and their families with investment fraud and other problems.


It's worthwhile to send a formal complaint to the NASD. This step probably won't get your money back (you'd generally need to pursue arbitration or mediation for that), but it can lead to an NASD investigation that could result in penalties for the broker or firm. The NASD Investor Complaint Center includes all of the information to get started. Here's more information about how it works.

You also may want to consider NASD arbitration, which is designed specifically to help people get their money back. Here's some more information about the NASD's arbitration and mediation program and how to get started, including a brochure from the NASD with more information about the procedure.

The SEC has an information page with resources for finding a securities attorney. Members of the Public Investors Arbitration Bar Association specialize in helping individual investors in securities disputes.

Inappropriate sales and trades to seniors is, unfortunately, a growing problem. A recent survey found that nearly half of the investor complaints received by state securities regulators were made by seniors. Some of these complaints were about sales of unsuitable investments -- such as deferred annuities with long surrender periods sold to people in their 80s who needed the money right away. Others were similar to your mother's situation, where a broker made trades that were inappropriate for someone of that age (which is even a bigger problem in your case because of the large tax bill that was generated).

Got a question? Ask Kim at askkim@kiplinger.com.