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One branch of "commercial litigation" with which Furman has considerable
experience involves legal action on behalf of those who have been cheated or disadvantaged
by stock brokers and brokerage houses. This legal representation involves operating within the special protocols of the National Association of Securities Dealers (NASD) dispute resolution process and requires a working knowledge of the rules of the stock exchanges as they relate to individual customers. Claims may result from inappropriate investment recommendations that violate, or appear to be in conflict with, what are known as the industry's "suitability" standards. Each of these cases is particularly "fact sensitive" -- that is the outcome may depend on such specific factors as an individual's stated investment objectives, age, wealth, health, and proximity to retirement age. Other cases reflect claims of unauthorized trading. They often allege that a broker acted on the "authority" of a spouse whose name, however, was not on the account, and who did not have trading authorization or a power of attorney. At other times brokers are charged with what is called "discretionary" trading without the proper written authorization from the client. Another common complaint leading to a claim against a stockbroker results from what is known in the trade as "churning." This practice by a broker is defined as "making the account excessively active by frequent purchases and sales primarily in order to generate commissions." While "churning" is proper if you are agitating milk in order to make butter, it is clearly illegitimate conduct as it relates to a client's brokerage account. It is never proper for a broker to undertake an excessive number of trades in an account in order to build commission income, rather than serve the interests of the client. Legal actions against stockbrokers, whatever their reasons, usually pit the client against not only the broker, but the brokerage house and its virtually unlimited resources. In one case brought by Furman the brokerage house paid its own lawyers well in excess of one-quarter million dollars in legal fees and many thousands of dollars in exhibit and reproduction costs in order to defend itself. Ironically, these defense costs undertaken by a major brokerage house totaled far more than the claim of damages, or the sum for which the case could have been settled. Because few clients can absorb the costs of such litigation -- especially after they have lost large sums as a result of broker deceit or ineptitude -- Furman usually offers to undertake representation of clients on a "partial contingency" basis. That is, the size of the lawyer's fee is ultimately "contingent" upon -- it depends upon -- the extent of the recovery from the broker or brokerage house. As with all other matters, free initial consultations are offered by the law firm. |
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