Saturday, April 11, 2009

FINRA Arbitration - Respondents' Ratification defense in the age of TARP!

Banks, Brokers aggressively assert customers' “Ratification” to defend themselves against customer complaints.

It's inconvenient in the age of TARP.  When they should look in the mirror when it comes to their own investments!  They ask for BAILOUTS!

In FINRA securities arbitration, Wall St investment banks and brokerage firms are very successful defending themselves against customers’ complaints by asserting the customer knew, and therefore ratified investments, pinning 100% of the liability for losses on the customer.

Any securities litigator (PIABA attorney) and any in-house counsel will admit to this tactic; EXCEPT upon Self-analysis. When applied to the banks’ own proprietary trading book, toxic asset problem – Wall St investment and bank holding companies – may conveneintly forget in 2004, they pressured the SEC to allow them to use their own proprietary securities valuation models, fair market value was pretty fair then but not now? recognize profits, paid out oh so tiny bonus checks from these now toxic assets and consciously (no one put a gun to their heads and said you have to buy this or hold that) “knew and assumed 100% of the risk huh?

Further - Suitability is more than that and should be contrasted to Ratification.
Suitability requires that the broker determine whether the customer has the ability, access and skills to independently evaluate risks in the account.  Malcolm Gladwell in "outliers" correctly identified that "time" on the job provides the strongest and best explanation for differences in results; citing school kids, Bill Gates, the Beatles and himself!

To suggest a customer has spent more time, has more capacity to evaluate than the adviser and often thousands of support personnel (whose costs are embedded in fees, costs and expenses) fails to contrast skill sets, representations, reasonable reliance, use of or omission of same and time of use to the single customer.

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