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Online trading provides investors with a convenient method in which to take part in today’s financial markets.
But don’t let the ease of investing online fool you. It is more important that ever that you become educated and
savvy in your financial matters.
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seniors checking over recordsSenior citizens have long been a coveted demographic for financial fraud, but when
banks, too, try to get in on the action, something really stinks. The case of a Wachovia client who recently sued
the bank for turning a blind eye on a questionable practice that cracked her nest egg, and the attorney who
helped her win back her losses, shines light on the hidden relationships between banks and brokerage firms that
sell investment products.
In a claim against Wachovia, as in similar cases that securities fraud attorney Mark Tepper said he has tackled,
a retired court clerk alleged a bank teller disregarded her request for opening an IRA account and instead told
her to speak with a Wachovia financial adviser. The adviser was not an employee of the bank, but worked for its
sister company Wachovia Securities, Inc. (now Wells Fargo Advisers), and had a desk on the premises of the bank.
Wachovia disagreed with the $25,000 award, set by the Financial Industry Regulatory Authority, which also ordered
an additional $5,525 interest payment to the bank's client.
"The paramount priority of our firm is always to do what is right for our clients. Any implication that practices
contrary to that priority ever 'flourished' or have 'been allowed to flourish' in this organization is simply
incorrect," a spokesman for Wells Fargo said.
The practice of redirecting seniors to investment specialists, even when they only request simple services such
as buying Certificates of Deposit or opening a money market account, is something banks do to develop business
for their affiliate companies, the Fort Lauderdale, Fla.-based Tepper said.
"Some banks institute policies like these that reward tellers for referring bank clients to the broker that's
sitting in the bank," Tepper, a former New York assistant attorney general, told Consumer Ally. "Elderly people
are a targeted group for these aggressive types of referrals because they just seem to be less combative."
In another case Tepper won for a client, an AmTrust bank teller told Jacob Froess, a 56-year-old retired auto
mechanic who wanted to purchase a $70,000 CD, that he had to speak with a financial adviser. Unknown to the
client, the adviser did not work for AmTrust bank, but for its sister company, AmTrust Investment Services, Inc.,
which sells mutual funds, annuities and life insurance.
To convince him to abandon his plan for a CD and buy into a high-risk mutual fund instead, the adviser told
Froess that CD rates are low and that he could do much better than a CD, according to the lawsuit. To cajole him
to pay a $3,157 up-front fee, she explained: "This stuff is so good that you have to pay to get in -- but it is
worth it, it is that good! And you will make it back in short order, and make more money."
Froess, who earned less than $25,000 a year and had saved the money in his CD over eight years, had virtually no
experience with stocks, bonds, or mutual funds. Despite this, the adviser indicated he had good knowledge of each
type of investment, including, astonishingly, options, variable contracts and limited partnerships, the claim
said.
When he realized a few months later the investment did not earn any interest and was in fact losing money, he
sold it -- at a loss of $12,000.
"This is a bait and switch case," Tepper's claim against AmTrust contended. A FINRA arbitration panel awarded
Froess full restitution of his losses, plus $7,000 in what would have been accrued interest had his investment
performed as promised.
The Investing Online Resource Center is designed to serve as a valuable source for noncommercial information
about investing online. This site was created solely for educational purposes and is maintained by the North
American Securities Administrators Association (NASAA). NASAA is the oldest international organization devoted to
investor protection. Its membership consists of the securities administrators in the 50 states, the District of
Columbia, Puerto Rico, the U.S. Virgin Islands, the provinces and territories of Canada, and Mexico. State and
provincial securities regulators have a long tradition of protecting investors through financial education.Download