oedipus
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Location: PA
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| Churning in an IRA |
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Hi, I'm new on here, a novice in the trading market and need advice.
My sister is a financial advisor with Janney Montgomery Scott.
I have been investing with her and her firm for almost 20 years (since I started working after college). I always followed her advice since I am not educated nor savvy with the whole financial market going-ons. I implicitly trusted her because she is the professional and basically she is family (or so I thought).
I had 2 IRAs with my sister (a Trad and a Roth). My Trad has more money since I had rolledover all my 401K from 3 previous companies I had worked for.
About 2 weeks ago, I was able to retrieve the actual transaction statements from both my IRA accounts for the last 4 years. Janney provides statements to display all the buying/selling trades on accts plus fees/commissions.
Here is the summary I discovered in the last 4 years:
I have been paying my sister between $2,100 to $3,000+ per year to manage both my IRAs. These fees are just the trades she made on both IRAs. I haven't factor in maintenance fees and other fees I still have yet to uncover.
The net total of both my IRA is in the low 100K so her fees are 2% to 3% per year.
The trades in my acct (esp my trad IRA) is rather excessive.
Every month there is a trade. Some more than others.
In 2010, 6 trades in the first 4 months (I ended my relationship with Janney in May 2010).
In 2009, there were 27 trades.
In 2008, 34 trades.
In 2007, 49 trades.
Commission charges are between $50 to $100+ per trade.
And the worst part, in many of the trades I saw, she bought high and sold low. Several trades did make some money, but not enough - the profit went directly to paying her fees/commission. My mouth dropped (of course she never disclosed this when she contacted me to sell).
I am astounded at the excessive activity. When I confronted my sister, her explanation is - I called you on every trade and you agreed to it (basically, she tapped onto my ignorance and took advantage). She also said, I am not alone, she does it on her own account and on others - giving the impression that this is "normal" activity in a retirement acct. Also she blame the decline of the market, the market, the market.
The question I have is, what is considered "normal" activity in a retirement account that has 100K or less?
Because I compared 2007 to 2010, I did not make any money. She did.
I'm still waiting to gather past statements prior to 2007 to see if she has been churning my account from day one.
I know I don't have a legal case against her since she covered her ass in contacting me for every trade. I admit I was very stupid into trusting my own sister, believing she had my best interest and I know I can't claim ignorance in any legal case.
I took the time to calculate all the principal I had given to my sister's firm since year one. The good news is, the total principal I had invested with her is almost the same amount I withdrew from her firm last year in May 2010. So I didn't lose any principal (but certainly didn't gain anything). I could have buried all my money in a mattress for the last 20 years and today, came out even. I guess I have to look at this as the bright side.
At 40yo, I have to start over my retirement plan.
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Wed Jun 15, 2011 4:12 pm |
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Deaner
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Wow, I re-read this an saw that you are basically even after 20 years. I thought it was only 4 years and thought well maybe it's possible you could be over the last 4 years.
So it looks like you were paying 2-5k a year in just trading fees. Amazing.
But yeah I'd do what Coaster said.
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Thu Jun 16, 2011 7:40 pm |
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oedipus
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Joined: 15 Jun 2011
Location: PA
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Thanks ... I am in contact with a securites lawyer and he needs me to retrieve a few documents. He will review my portfolio but he did warn me that I may not be able to recover any monetary loss due to the fact that my sister did called me at every trade. And the statue of limitations is 3 years.
So in the last 3 years:
There is one trade I am so pissed off with her,
On 8/21/2008 - she bought me 50 shares of Las Vegas Sands @ $42.50 per share. Her fee/commission = $92.17. On 11/12/2008 - she sold all 50 shares @ $4.94 (fee/commission = $247.00). WTF??!!! Why would she do that???
Here's another one, this one is fishy:
On 8/25/09 - she bought me 100 shares of Green Mountain Coffee @ $60.50 per share (commission/fee=$112.31). On 4/21/10, she sold all 100 shares @ $80.81 (commission/fee = $112.31). The following day, 4/22/10, she bought all 100 shares back @ $85.86 (commission/fee = $112.31).
This one I have to investigate, I don't recall 2 phone calls back 2 back - to sell and buy back the same stock.
Like the old saying goes, "No one can screw you over like family".
Again, I wanted to ask .... what is considered "normal" trade activity in a retirement account? How frequent? What is consider excessive?
I just read former congressman Anthony Weiner
only made 8 stock transactions on his portfolio last year. His activity was certainly less risky than mine.[/url]
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Fri Jun 17, 2011 3:30 am |
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oedipus
Member
Cash: $ 2.75
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Joined: 15 Jun 2011
Location: PA
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I've spoken with a Securites Lawyer and basically he tells me I have a Suitability Claim (and not a Churning case. You were Right Coaster!). The bad news is, the cost to recover my loss will be smaller than what I will be paying in attorney fees. The fact that my sister "called" me for every trade and that I did not lose any principal (except for investment time) is not significant for this lawyer to take my case.
My best bet is to file a complaint with Janney claiming unsuitable management of my retirement account and the 2 unauthorized trades (ie. Green Mountain Coffee).
I have the name, number and email to the branch manager (and I've already spoken to his secretary to obtain documentations I could not retrieve from online).
I've never done this before.
Should I skip the branch manager and go straight to their legal dept (even though I will not be suing my sister nor will I want to go to arbitration).
Even though I won't be asking for money, I would be content to have a complaint filed on my sister's FINRA public record. Currently she has a clean record (don't know how. I think she only targets the ignorant and naive - namely me).
How should I proceed?
How should the letter be written out? (As you can tell, I am definitely a novice at this).
Also, is there some stockbroker rating/review site where I can put my sister's full name and the branch she works at and tell my story (to warn other potential investors)? Something that Google would pick up if a potential investor wants to find out about my sister as a financial advisor.
Any help/suggestions will be appreciated.
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Tue Jun 28, 2011 4:43 am |
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oedipus
Member
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I've sent a complaint letter to my sister's boss and copied FINRA.
This was 3 weeks ago.
Since this is a complaint (and not a lawsuit), what is the timeframe, if any, to hear a response from the firm???
My plan is to send the same complaint (modified to include that my sister had "defacto control" over my retirement account) to the SEC via their website.
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Mon Aug 15, 2011 3:05 pm |
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kate032
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I don't have any helpful information to share, but just wanted to say that I'm really sorry to hear how your sister treated you. Not only do you have the complete mismanagement of funds to deal with but also the emotional ties of a close family member.
It seems that Janney Montgomery Scott is having other problems as well these days:
http://www.sec.gov/news/press/2011/2011-144.htm
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Tue Aug 16, 2011 2:55 am |
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oedipus
Member
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Location: PA
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@ coaster - no, there was no 'respond by' clause. Due to my failure to discover my sister's unscrupulous actions in my retirement portfolio early, this is a complaint rather than a lawsuit/legal action. I pulled my money out of Janney in May 2010, I discovered the excessive trading this past June 2011 - which means I did not 'act promptly'.
My goal is to have my complaint be on my sister's public record FINRA Brokercheck.
@ Kate - thanks for your support. I learned that Greed is an insidious, deceptive disease. It overshadows all integrity, honesty and family.
There is alot more to my saga than just my retirement account that I have not shared. But in the end, my sister and I are completely estranged (I literally despise her). I've already told the rest of the family (including cousins). That is my punishment for her.
Thanks for the information about Janney.
I posted it on my Facebook page.
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Tue Aug 16, 2011 4:31 am |
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eastmn
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I've always read that the statute of limitations
begins when the crime is discovered.
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Tue Aug 16, 2011 6:09 am |
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eastmn
Senior Member
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Off the wall here, but could the wayward sister also have a case for employer abuse *(workers comp suit)? Might be a way to get some added satisfaction, $ince $he $hould have been properly and ethically $upervi$ed  .
Thanks for sharing your story here.
I've got a friend who needs to see this.
Last edited by eastmn on Tue Aug 16, 2011 12:46 pm; edited 5 times in total |
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Tue Aug 16, 2011 10:10 am |
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oedipus
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Cash: $ 2.75
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Joined: 15 Jun 2011
Location: PA
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According to my friend's husband who is in the industry, he says the SEC is cracking down on defacto control. He told me to stress this on my complaint.
He told me of a recent case where a broker contacted and convinced a retiree to buy/sell-buy/sell, knowing fully well that the retiree trusted and followed every advice she gave. The broker was following the law by contacting the retiree on every trade. In the end, the broker swindle the life savings out of the retiree.
Unscrupulous brokers (like my sister) will manipulate unknowledgable investors (like me), takes the time to know the client's behavior, know their naivety/weaknesses, and then abuse their complete trust by taking advantage. My sister fully knew I will not say no to any trade recommendations she made.
I bet she began with something small & insignificant, to test out the waters. When she got away with it, gradually increase in amount and scope. After 18 years, I now KNOW my sister did this to me to the very end - to the point where her last trade (with the Green Mountain Coffee) in my retirement account was completely and blatantly unauthorized. She got too greedy and took advantage.
I tried to look up that case my friend's husband mentioned but cannot find it. However, I found this one:
http://www.mitchell-attorneys.com/legal-articles/authorities-on-securities-account-churning/
De facto Control – This is indirect demonstration of control. In the Mihara case and Hecht v. Harris Upham & Co. N.D. Cal. 1968 – “The requisite degree of control is met when the client routinely follows the recommendations of the broker.” This is de facto control by the broker. Therefore, control can be implied when a stockbroker possesses overwhelming influence over an unsophisticated customer. The touchstone is whether or not the customer has sufficient intelligence and understanding to evaluate the broker’s recommendations and to reject one when he thinks it unsuitable. An interesting method of determining control through trading patterns can be observed by examining confirmation slips and monthly statements for disclosure as to whether a number of transactions were “unsolicited” by the stockbroker, meaning, that the customer ordered many of the transactions without ever having had the securities called to his or her attention by the stockbroker. There are ten principal characteristics of a customer on which the courts have traditionally relied in reaching a decision as to whether or not control can be inferred. The important characteristics are: Sophistication, formal education and occupation, prior or contemporaneous securities investment experience, the customer’s reading habits, the wealth of a customer or the size of the account and most importantly, the element of the psychological dominance of the broker over the customer, which is really a conclusion based on the above factors. The SEC has thus noted the customer’s inability to understand the difference between how a margin account or options work, or the effect of the ex-dividend date on the price of a security. A finding that the customer had difficulty in understanding the investment advice given to him, even when the broker tried to explain it, is particularly relevant. These inadequacies tend to make the customer dependent on his broker. The mere fact that the customer approves the trades and receives confirmations does not prove ratification of churning activity. In Hecht v. Harris Upham, it states, “The Court concluded that while confirmation slips were sufficient to inform plaintiff of the specific transactions made, they were not sufficient to put her on notice that the trading of her account was excessive.” The fact that a customer received confirmations and monthly statements will not defeat establishment of control over the account where such documents are beyond the comprehension of the customer or the broker reassures the customer after receiving complaints.
Last edited by oedipus on Tue Aug 16, 2011 5:40 pm; edited 1 time in total |
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Tue Aug 16, 2011 12:14 pm |
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oedipus
Member
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Location: PA
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Well, it seems 30 days is the magic number.
My complaint to both the firm and FINRA was on July 22, 2011.
Their response was dated August 23, 2011.
I received Janney's response letter this past Friday 8/26/11.
But the response letter just states that they have received my complaint and someone from their legal department will be contacting me in regarding the results of their review/investigation.
That's it.
What suggestions do you have in talking to their legal representative?
What questions do i answer or not answer. I know their legal rep is trying to cover their ass and my sister's actions.
I'm going to tell my truth but everyone knows how lawyers work.
Again, this is just a complaint and not a lawsuit.
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Sun Aug 28, 2011 1:35 pm |
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oedipus
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Location: PA
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"The securities lawyer you talked to earlier ... did you retain him/her as counsel?" - No, he provided me with free initial consultation and was honest to tell me it would cost more to paying his fees than to recover any loss from Janney.
FINRA provided me with a brochure - reading it now but do not see anything about handling complaint responses.
I have a lawyer friend who has been giving me advice though her specialty is not in securities. I will seek her counsel.
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Sun Aug 28, 2011 9:44 pm |
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oedipus
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Cash: $ 2.75
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Joined: 15 Jun 2011
Location: PA
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Well, I got a response letter from Janney Legal ..... basically they are denying any and all wrongdoings. Without getting into details, they are bunch of corporate lawyers defending their firm and their staff - against little-ole me.
In 2 paragraphs, they are saying my dispute is a private matter between my sister and I and that I should not have involved the firm nor with FINRA.
They are implying that I had a falling out with my sister and I am using this complaint to get even.
But their response is so far from the truth. The falling out was the reverse. I discovered the Transaction Confirmation Statements this past June and the falling out + the complaint came after.
They ended their letter by saying if I continue with this complaint and if I involve any regulatory agencies, in a nutshell, they will sue me.
Well, the good news is, FINRA contacted me last Friday. They read my complaint and reviewed the 100+ pages of transaction statements I had sent them - they want to investigate. FINRA gets many complaints and many of which are dismissed because of unhappy or unsatisfied customers that have no actual misconduct charges against the firm or their advisor.
They feel I may have a case but will need to investigate.
FINRA will keep me abreast.
I'm spending the time now (with some help from friends) to put letter #2 together to rebute their response.
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Tue Sep 06, 2011 6:22 pm |
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yingxuy
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I recommend sticking with the applicability and fiduciary issues. I do not think the "de facto control" will fly, because you said she was the line for each industry. Do not even deal with her boss. He / she is part of the problem.
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Tue Dec 06, 2011 2:23 am |
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