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why? oh, why? remove restrictions?

December 23, 2008

Dear Reg "S" fan,

Investors - especially small investors - have lost millions upon millions of dollars due to stock fraud. The scandals of recent years are still fresh in the minds of anyone with even a small stake in the stock market. While we're all familiar with the scandals of Enron, most of us don't know the fine print. If you've got money in the stock market, now is the time to learn your rights.

When you signed a contract with your brokerage firm, you almost definitely agreed to a clause regarding arbitration which is mandatory. This means that if you have a dispute with your broker or brokerage firm, you have to file an arbitration—you can’t file a lawsuit (except in certain conditions, such as in a class action). 

FINRA is the Financial Industry Regulatory Authority and it basically oversees the financial industry (hence the name). Its members have to agree to mandatory, binding arbitration to resolve disputes. So that means that if you have a complaint against your financial advisor or brokerage firm, you file an arbitration.

If there are out-of-court settlement agreements out there, then also is what is known as the private stock purchase agreement. Huge canvass for counsels to paint colors of ifs and buts.


More next week after court watching,

Frank Watts

n.b. Thanks Chief Bill, IL