Subscribe to our mailing list

* indicates required







We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.


Stay Informed with the latest fanancialish news.





How Best to File a Customer Complaint

October 23, 2019

by Howard Haykin



A customer bought preferred shares in a company based on a broker’s recommendation. Later, the issuer stopped paying dividends and the value of the investment fell significantly. The customer complained to the broker - verbally and in writing – and the broker issued 2 personal checks totaling $28,000 to settle the complaint.  END OF STORY? NOT QUITE!



The broker was caught “settling a customer complaint away from the firm,” which led to his being discharged from Morgan Stanley, to a $5,000 fine, and to a 15-day suspension from the industry. The affair also left a black mark on his reputation and in the industry's public records for all to see.


Even though the broker informed his firm about the customer complaint, he never told them about his payments to the customer. That was a bad decision by a broker who had 22 years' experience and was well aware that his conduct violated both industry rules and firm policies - which resulted in big-time penalties.


And this is not an isolated instance. In a similar case, another broker was caught paying her customer $1,019 to settle the customer’s verbal complaint about surrender fees on an annuity policy. Though the settlement payout was much smaller, this second broker received the same onerous penalties as the first.



CUSTOMER TAKE AWAYS.    While settling one’s complaint directly with a broker may seem like a good deal and quick fix, it’s not recommended - the customer has little to gain and they help perpetuate a problem.
  • Customers risk losing out if and when their brokers renege on any agreed-upon settlements - which frequently happens.
  • Customers break the rules when they settle complaints directly with brokers - which, in turn, increases the possibility that their brokers will be fired and they will have to look for a new personal broker.
  • Customers have a better chance at recouping their full losses by seeking compensation from multiple parties - like the brokers' firms and firm supervisors.
  • Customers who submit written complaints to firms and/or regulators can help “bring to justice” offending brokers – and, thereby reduce the risk that other customers can or will be victimized in the future.



[For further details, click on ... FINRA Case #2019061700301.]