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.




Investor Protection

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 violated securities rules by “settling a customer complaint away from the firm.” Needless to say this was a bad decision by a broker who had 22 years' experience and was well aware of industry rules and company policies. The broker compounded his violative behavior by only telling his firm, Morgan Stanley, about the complaint - but not about his personal payments to the customer.


And the broker paid big-time for his error. He lost his job with Morgan Stanley, was fined $5,000, and was suspended 15 days from the industry. The broker also had a permanent black mark on his industry records - a soiled reputation for the world to see.


NOT AN ISOLATED INSTANCE.    Despite the risk of hefty fines, brokers frequently settle customer complaints away from their brokerage firms. Around the same time, another broker was caught paying her customer $1,019 to settle a verbal complaint about surrender fees on an annuity policy. Though the settlement payout involved a much smaller amount, this 2nd broker received the same onerous fines and penalties as the first broker.



CUSTOMER TAKE AWAYS.    Settling one’s complaint directly with a broker may seem like a good deal and quick fix, but it’s not recommended. There's little to gain and it helps perpetuate a problem.
  • Customers risk losing out if and when their brokers renege on any agreed-upon settlements - which frequently happens.
  • Customers, themselves, break the rules when by settling complaints directly with their brokers - which, in turn, increases the possibility that their brokers will be fired and they'll 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 along with their broker.
  • 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.]