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Is Your Broker Taking Advantage of You?

Brokers buy and sell stocks and securities upon your request. But these days, big losses have left many investors incensed and blaming their brokers for ignoring instructions and disregarding their risk tolerance.

And so the battle begins.

According to FINRA, Wall Street’s own self-regulator, arbitration cases filed against brokers are up more than 85 percent just since last year. Pursuing a case requires painstaking proof of wrongdoing and even if you win it doesn’t mean you will recoup all your losses. Investors typically recover just 40 percent of their money.

The better option is to know, precisely, what your broker can and cannot do with your money before you hand him or her the proverbial keys to your portfolio. John Gannon, senior vice president in the Office of Investor Education at FINRA, points out that first and foremost, every broker must be licensed with FINRA. If they aren’t, you’re in trouble.

Brokers can make recommendations about specific investments and buy and sell those securities on your behalf, but they cannot engage in misconduct. That would include making unsuitable recommendations, executing trades without your authorization or misrepresenting or omitting anything about an investment they recommend.

If you find yourself unhappy with your broker’s handling of your money, Gannon suggests the following:

1. Contact the firm. If you are unhappy with a specific transaction the first step should always be to reach out to them. If you are unsatisfied with their response, you can contact the broker’s branch manager or the compliance department within the firm. If you have lost money, make sure to put the complaint in writing and keep a copy of what you send.

2. You also have the option of complaining directly to FINRA by filing a complaint here. This ensures that the agency can process your complaint quickly, Gannon says.

3. If you still aren’t satisfied, there is the option of arbitration. This is only for those who have lost money and believe that the firm or specific broker engaged in misconduct. It is NOT if you simply lost money because the market tanked. If you go this route, Gannon suggests first contacting an attorney that specializes in security issues.

The power is in the hands of the investor when it comes to their portfolios. Nearly 80 percent of those who are misled or defrauded don’t report it, Gannon says, citing a FINRA Investor Education Study. Know what your broker can and cannot do on your behalf and fight back if, and only if, you feel you’ve been taken advantage of.

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