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
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."
- An incompetent attorney can delay a trial for
months or years.
- A competent attorney can delay one even longer.
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."
"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."
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
ARBITRATION ASSOCIATION LINK: has information about mediation,
arbitration and other forms of alternative dispute resolution (ADR)
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: What is the purpose of an expert in mediation and
arbitration by Roger Dietz.
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.
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
STATISTICS LINK: All the things you need to know before you
file. Actually, before you buy anything from a broker.
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.
ALLOCATION: Different than diversification. Statistical/real life
evidence as to how it works
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
BAD ARBITRATION: Comments
by attorney Richard Skora. Excellent analysis
definition and some adjustments in thinking.
ACTION LINK: This alphabetical database keeps you posted on the
latest class-action proposals, and even provides a way for you to join
ARBITRATION PROCEDURE LINK: Includes the NASD's Rules governing
the areas of Arbitration and Mediation.
Lots of problems and inconsistencies with
arbitrators. Many do not understand the fundamentals of investing.
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.
WITNESS CODE OF CONDUCT LINK:
EXPERT WITNESS QUALIFCATIONS:
An attorney describes the four areas needed to
be an expert
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.
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.
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
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.
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.
LINK: Instead of NASD arbitration.
ACCOUNTS: What is the responsibility after an investment is made?
After 3 months, 3 years?
LINK: This page lets you review potential changes in the
laws, get material about your brokerage firm and agent, etc.
ARBITRATION BROCHURE LINK:-- information from the NASD summarizing
the process of broker arbitration.
ASSOCIATION FOR COMMUNITY MEDIATION LINK
What are the backgrounds of the brokers and agents. You'll be
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.
definitions that must be known by all investors BEFORE
ARBITRATION STATISTICS LINK: Arbitration, mediation, types of
cases, closed cases and more.
CLASS ACTION CLEARINGHOUSE LINK: This site by the Stanford Law
School and has some good info on securities class actions, pleadings
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.
EXCHANGE COMMISSION (SEC) LINK: Get info on bad agents, access to
EDGAR database and more.
FIRMS CRD LINK: NASD provides CRD numbers for
all registered securities firms. You will need these if you file
against a firm.
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
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
LITIGATION LINK: A Price Waterhouse site designed to provide info
to the legal and business community.
REGULATION IN TODAYS SECURITIES MARKETS LINK: An analysis of
how it occurred
and what is gong on now. Professional article. Very good
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.
INVESTOR: Very few investors are sophisticated. Very few brokers
SECURITIES REGULATORS LINK: Though
I doubt that a one knows diversification
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.
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
(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:
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
letter regarding securities petition on arbitrator reform