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In the Crosshairs

Street Level: In the Crosshairs

I know one plaintiffs' securities lawyer who is salivating. Perhaps awed is the better word. Basically, he and an army of other lawyers are about ready to file suits on behalf of aggrieved retail investors who claim to have lost money because of the conflict-of-interest scandal.

Remember that the announced $1.48 billion global settlement only wraps up the fines levied by the scrum of government regulators; it does not prohibit civil lawsuits, which could cost the 12 Wall Street firms “hundreds and hundreds of millions of dollars — and maybe more,” as my lawyer friend puts it.

Indeed, there is a potential tidal wave of civil suits ready to be filed by retail clients, an inundation of litigation that could overwhelm the arbitration system. What will set this wave in motion? Eliot Spitzer's promised release of findings from his investigation into conflicts-of-interest at the major wirehouses. “That's going to be a big help in bringing our cases against these firms,” says my lawyer friend over a cup of coffee. He alone may file hundreds.

At least three firms (Merrill, Salomon Smith Barney and Credit Suisse First Boston) have been charged with outright fraud as part of a class action suit filed by Milberg, Weiss, Bershad, Hynes & Lerach. Milberg argues that the pump-and-dump schemes of the wirehouses duped retail investors and cost them dearly. Many expect the case to settle for a sum in the neighborhood of $3 billion.

The trouble with the coming onslaught of retail civil cases is they can't be heard like that — as one giant class action. Instead, they'll be adjudicated as individual arbitrations, because, well, them's the rules. Whenever a person opens a brokerage account, he waves his right to seek redress in court.

So where does that leave the individual wirehouse advisor? For now, thankfully, personal-injury lawyers seem inclined to leave brokers out of the suits, the idea being that brokers were victims of the fraudulent research, too.

Besides, the real money is in the firms' coffers anyway.


Outstanding Broker Awards

For the 23rd year, Registered Rep. will honor the industry's top professionals with the Outstanding Broker Awards to be published in the May 2003 issue. Nominees must meet the following criteria:

  • A minimum of three years in the industry as a producing retail registered representative (or registered investment advisor).
  • A minimum of one year's tenure with the current firm as of Jan. 1, 2003.
  • Good compliance standing. (Since nominees' compliance records will be checked, we must have their middle names and CRD numbers.)
  • Not a previous Outstanding Broker Award recipient.
  • Ranked in the top 25 percent of the firm's retail producers.

To nominate someone online, go to:

We thank you for your support. Drop us a line with your comments at: 249 W. 17th St., New York, N.Y. 10011-5300. Or email us, [email protected]. Publisher Rich Santos can be found at [email protected].

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