Bad Broker Blues

March 28, 2007 7:01 AM

My family's broker hasn't moved my money. It's accruing at less than 1% and has been for the past 7 months. Do I have any recourse?

When I turned 21 my college fund moved in to my control. I'm in law school straight out of college, and between my parents' smart investing and my scholarships I was lucky enough to have about $30k leftover. I met with our broker and we decided to move it to a 529 account, which allowed it to be invested in a number of funds w/o an income tax penalty as long as it would be used for educational purposes. This was in August.

December rolls around and I realize that the money is still in a money market account, accruing next to nothing. I have a stern talk with broker and he promises to move the cash. Now, I finally got online access to my account and realized that it wasn't actually moved. I've seen a <1% return instead of 8% or so, which puts me out over $2k. Is there any way I can get restitution?

posted by craven_morhead to work & money (12 comments total)

Find another broker.
posted by caddis at 7:05 AM on March 28, 2007

If you can prove your request, you can take the broker to small claims court; check the rules in your area for eligibility.

Brokers are heavily regulated. Call your state attorney general's office and find out who regulates brokers, and get in touch with them.
posted by theora55 at 7:10 AM on March 28, 2007

Do you have any proof that he agreed to move it?
posted by smackfu at 7:11 AM on March 28, 2007

This sounds like a good project for a law student to work on. You could go to the law library at your law school and do some legal work. This would be good, because brokers are often very reluctant to let money go from them to other brokers, and pigeon feed stuff like this is bread and butter for junior lawyers.
posted by buzzman at 7:12 AM on March 28, 2007 [1 favorite]

Re: Proof:

I have the email I sent asking him to move the money in December, but the August assurance was in August and the December assurance was over the phone.
posted by craven_morhead at 7:13 AM on March 28, 2007

Er, the august assurance was in person, that is
posted by craven_morhead at 7:43 AM on March 28, 2007

Follow up and see what he can do. If he can't do anything, ask to have it escalated. If they won't do anything, ask for the ombud's contact info.

I have had orders corrected after the fact, when I had proof of communication.
posted by acoutu at 9:30 AM on March 28, 2007

Acoutu, by "corrected" do you mean that they've given you the money you would have gained had the order gone through? And what do you mean by escalated?
posted by craven_morhead at 10:26 AM on March 28, 2007

Yep - they can correct orders that were not placed or placed incorrectly. Any discrepencies in what you would have paid vs. what it is now worth go to the broker (debit or credit). Have it hit his account if you have proof of intent that the company accepts, then move to a different broker. You can request different brokers within the same firm or with the same investment company, so you don't have to open all new accounts and wait for transfers.

Please be aware that many companies have disclaimers regarding trade orders - many have them listed on their outgoing e-mail and on voicemail messages, stating that orders placed by e-mail or voicemail are not valid orders to buy or sell and the broker cannot be held accountable for you not following up in person.

He would not have been able to open a 529 account for you without you filling out the appropriate paperwork (or at least signing the application) - if he didn't hear back from you re: physically opening the account, he wouldn't place the trades b/c you requested that the trades occur in the new account. If you opened the account, transferred the money, and made him aware that this took place and you were all set to start buying, he should be accountable. If these events didn't take place, you aren't out any money, you just didn't earn as much as you could have.

In the future, request that he send you written confirmation (by e-mail is fine) of your verbal agreements and keep all of your trade confirmation e-mails or letters. That should eliminate any guess work in future dealings.
posted by blackkar at 10:27 AM on March 28, 2007

Escalated means to speak to his supervisor/boss, to move up the chain of command.

They "correct" your account by selling you the exact amount of shares that you would have purchased at the exact price you would have paid had the trade occured. The difference in price to what you would have paid and what it actually costs are absorbed by the firm that screwed up.
posted by blackkar at 10:39 AM on March 28, 2007

The broker is in a licenced/regulated profession. The agency that issued his licence would be interested in knowing about this situation. (Not that this gives you the lost money)
posted by winston at 12:17 PM on March 28, 2007

NASD. They will take care of the problem.
posted by Ironmouth at 5:41 PM on March 28, 2007