Accountant, Arbitration, Discretionary Trading, FINRA, Investing Profits and Losses, Investments, Securities Accounts, Suitability, Unauthorized Trading, Waiver, Year End Statements
It’s the New Year, what is undeniably the greatest false start time of the year. People use the date as a starting point for something, whether it be starting a new hobby, starting a new business or simply reconnecting with old friends.
For investors, this is the time when they will be receiving a year-end statement from their broker-dealers. Often times this is the document provided to accountants from clients, to assist with the calculation of gains and losses for tax purposes. For accountants, like the diet that your clients were always wanting to start but never did, many times investing clients are overwhelmed with the investing process and did not pay attention to their investment accounts as closely as they should have during the year. Now is as good a time as any for accountants to address the issue with their clients.
Upon receipt of the clients’ trading information, accountants may want to call their clients and pose the following form of questions: Tell me what you wanted to do with your account? What did your broker tell you before the trades took place? How many trades do you think took place in the account?
The answers to these questions will be very telling, the start of an understanding of what took place in the account. By way of example, if the client states she wanted the account to conservatively sit and grow with no activity, but there were thirty trades over the year, there is an explanation that should be received as to why the trades took place. Similarly, if the trading was unsuitable, or not in line with the client’s objectives (i.e., risk level, financial wherewithal, experience), then a stop should be put to the improper trading. Importantly, the suitability analysis takes place at the time of the trades, not at the time of the complaint, thus necessitating an immediate review of the trading.
On that note, unless the account is discretionary, brokers are required to speak to investors and receive specific authorization for every trade, buys and sells. If this did not happen, then there is a problem. In terms of the number of trades that took place, there comes a time when the trading in the account only makes money for one person – – and that is the broker. However, if the investor sits for years silently, riding the profits of the trading in the account and then complains years after the fact, such complaint may very well be looked at suspiciously as only a belated attempt to utilize the broker-dealer as an insurance company for market losses. By sitting silently, the investor may very well be waiving the ability to move forward on a viable claim. An investor has six years to file an arbitration claim against a broker before the Financial Industry Regulatory Authority (“FINRA”).
The New Year is a great time for accountants to work with clients and provide them with the necessary nudge to protect their investments.
The Law Offices of Barry M. Bordetsky represents customers and industry representatives in FINRA securities and employment arbitrations as well as litigants before state and federal courts. If you have questions about an issue you are involved with, please contact Barry Bordetsky at (800) 998-7705 or email firstname.lastname@example.org.