By Robert H. Rex, Esq.
On occasion stockbrokers are fired by the brokerage firm where they work and have handled your account for many years.
The reason for termination can be mundane. Perhaps it was motivated by business conditions, ie; lack of production by the broker or a cutback in staffing to adapt to the needs of the current business climate.
The termination can also be motivated for reasons which should be of greater concern for the investor/customer. Terminations are often the result of negligence behavior or wrongdoing on the part of the broker that has resulted in regulatory sanctions by the SEC, state securities regulators, and/or FINRA. These sanctions can range from fines to suspension and if the wrongdoing is severe enough, a permanent bar from the industry. Customer complaints and arbitrations over investment losses can also lead to the termination of a stockbroker.
In either case it can be expected that the brokerage firm will make contact with all of the existing customers of the terminated broker in an attempt to keep those customers from leaving for another firm. If the termination is due to the broker not doing enough business or a cutback in staffing and you still have confidence in the firm and the new broker they are proposing to handle your account, then you need read no further.
Has the Broker Been Sanctioned by Regulators?
If however the termination is the result of regulatory sanctions, customer disputes or arbitrations, you need to strongly consider whether it is in your best interest to remain with that firm or whether your financial security is better served by transferring your account to another firm.
It is not uncommon for firms to make promises they may not be able to keep when trying to convince you from transferring your account after they have fired your broker. They cannot guarantee the future nor predict with certainty that an account with losses will ever recover.
For example, if you have a portfolio that contains real estate investment trusts, private placements or other alternative investments that have declined in value,you should consider what kind of job the firm was doing in the first place that permitted the terminated broker to make these unsuitable investments with your nest egg.
How can you be assured they will do a better job in the future?
Can you afford to take the risk they will do a better job in the future?
Generally the only way to recover investment losses is to file a FINRA arbitration. We know that making the decision to file an arbitration against the firm that has been your trusted advisor for years is a difficult step to take.The relationship with a financial advisor is a very personal one and making the decision to pursue recovery of damages is not an easy one, but adjusting one's lifestyle to accommodate a loss of capital for the negligence of the brokerage firm is not an easy thing to do either.
If you have questions about losses in your brokerage account, call to speak with an experience securities attorney or follow the "Send Message" link at the top of the page and send us an email with details about your situation and we will be in touch.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.