WealthManagement Magazine

Smith Barney Settles IRA Class Claim

Smith Barney brokers may be getting calls from some clients over a class-action mailing sent out in late September.Though the letter is six pages of legalese, the issue is relatively simple: When Smith Barney acquired Shearson, it upped the annual fee on spousal IRAs from $20 to $40.One Shearson client, Hilary Gelber, acting as the sole class representative, sued on the claim that according to the

Smith Barney brokers may be getting calls from some clients over a class-action mailing sent out in late September.

Though the letter is six pages of legalese, the issue is relatively simple: When Smith Barney acquired Shearson, it upped the annual fee on spousal IRAs from $20 to $40.

One Shearson client, Hilary Gelber, acting as the sole class representative, sued on the claim that according to the customer agreements, the firm was required to notify clients prior to any increase in its annual fee, which it didn't do.

The increase was a "relatively small amount to each person, but to Smith Barney, it was a lot of money," says the plaintiffs' attorney, Mark Arisohn, of the New York City firm of Goodkind Labaton Rudoff & Sucharow.

The compromise that's been worked out would give each person who maintained a spousal IRA at Smith Barney in either 1994 or 1995, or both, a one-time rebate of $13. The settlement does not cover regular IRA accounts.

How much will Smith Barney be shelling out on this one in the aggregate? "We will not know that until we get the proofs of claim back, and that will not be until the end of the year," says Joe Sacca, an attorney with Smith Barney's law firm, Skadden Arps Slate Meagher & Flom, of New York City.

It's unknown how much Arisohn and his firm stand to collect. That amount depends on how many "proofs of claim" are filed by customers.

Smith Barney maintains that only a small number of investors were involved.

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