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Arbitration trouble

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Apr 23, 2005 5:13 am

I have a buddy that was falsely accused of an unauthorized trade from a **problem** client.  The client went through 2 other brokers and accused them of doing the same thing before landeding with my friend, who had no knowledge of the client's problematic past (if he had known he would never have taken him on...can he countersue based on this?).

What are his options at this point to save himself?  He doesn't want his record marked up and wants to continue working.

He is in the throes of arbitration right now and the client's strategy is to lie through his teeth and work the system for all its got.

Any help will be greatly appreciated.

Jan 10, 2006 4:21 pm

then he should also consider counter-claiming for fraud.

B/R ,and mainly insurance adjusters ,do not like to file counterclaims so the accused rep tends to go along with the “free legal advice”.
but what if the fraudulent lying or actions (that are easy for the rep to prove false )are not brought into the case until after the time period for an answer has passed? What can be done if anything?

Jan 11, 2006 3:45 am

Wow...Bill, where do I start when looking into a client's tendency to litigate? Is there a handy search engine for this type of thing?  What about past actions that were settled prior to would I best uncover those?  I can't quite get comfortable with the idea of interviewing the client/prospect's former advisor... wonder E&O keeps getting more and more expensive...

Jan 11, 2006 5:54 pm


It's so easy to do a preliminary check it's almost criminal not to. First off, I always suggest that my BD clients do at least a Google search and see if anything comes up.  Next, you go to and's arbitration databases and enter the names to see if there were any cases (unfortunately, settled matters generally won't show up).  And all of that is free.

Additionally, many BDs subscribe to services that do background searches on clients (typically this is done pending a decision to sue to recover unpaid balances and in response to threatened suits . . . but if you are concerned about a particular client you might inquire of your firm's Legal Dept/Compliance Dept. if they could run a search.

Frankly, I typically do the very same rudimentary check before taking on clients.  No, it's not foolproof and folks will slip through, but it's all free and can usually be done within a few minutes.[/quote]

Interesting...I'm going to check into what my B/D does as far as a background check on new clients.  All I am aware of is that they do some fom of credit check sine I always get verification calls when I'm dealing with someone who doesn't have much in the way of credit history.

I appreciate your advice, although, as I feared, there's not much in the way of being able to find information on people who settled prior to arbitration.  Thanks for your insight and advice...

Feb 8, 2006 1:04 am

IMO, the best defense against this kind of thing is a systematic practice of taking contemporaneous notes of conversations and orders taken/placed.  I’ve served as an NASD aribtrator and when the notes of the broker or client are presented, it makes a much stronger impression than verbal recollections of activites that allegedly occured several years in the past.  If one side has notes and the other does not, that leaves an impression too. 

[note: these remarks are obviously not helpful for your friend at this point but may prove helpful in the future to others reading this topic]

Feb 8, 2006 1:14 am


Feb 8, 2006 6:19 pm

Don't think so, sounds too nice and rational.

Feb 8, 2006 7:20 pm


Don't think so, sounds too nice and rational.


So far