Tags: Investor | Abuses | Top | Brokerages | Abominable

Investor Abuses at Top Brokerages Abominable

Tuesday, 14 May 2002 12:00 AM

Martin D. Weiss, chairman of Weiss Ratings, Inc., which reveals safety ratings on insurance companies, banks and brokerage firms, tells the Wall Street Journal that Prudential Securities scored the worst track record in investor abuses based on his study released today.

"Size is no assurance of reliability and integrity," Weiss explains, adding that avoiding small, "fly-by-night" brokerage shops is not the only thing investors need to worry about. The study shows that online broker Ameritrade Holding Corp. and U.S. Bancorp Piper Jaffray round out the top three firms that receive the most complaints from investors.

The Wall Street Journal reports that Weiss' study shows Prudential had 72.25 investor-related actions per million customer accounts during the last five years. These actions include 123 arbitration awards and 35 regulatory actions.

Ameritrade Holding Corp. had 67.11 actions per million customer accounts and U.S. Bancorp Piper Jaffray had 64.46 actions per million accounts. Both firms were subject to several dozen arbitration awards while Piper Jaffray also faced a number of regulatory actions.

A Prudential spokesman who was given a copy of the report did not review it, and rebuts by saying "our internal surveys indicate our customer-service satisfaction rates are very high." The spokesman says they cannot verify the accuracy of the data. Piper Jaffray and Ameritrade declined to comment to the Wall Street Journal.

The study analyzed 13,232 arbitration cases and legal and regulatory actions recorded by the National Association of Securities Dealers against 612 brokerage firms. The study examined the 18 top retail brokerage firms between 1997 and 2001, according to the Wall Street Journal, and explains the most common types of investor abuses and how investors can protect themselves.

Weiss says that what investors can expect to see in the wake of all the revelations about false research and advice from major Wall Street firms is "just the tip of the iceberg."

These revelations come at a time when Wall Street has little credibility to bank on. The NASD expects to receive a record 7,268 arbitration filings this year and approximately $40 million in damages was awarded during the first quarter of 2002 - more than 40 percent of the amount awarded in all of last year. The most common award involves allegations of execessive and unauthorized trading in customer accounts.

Wrongdoing in the securities industry is nothing new, but insiders say it is far more pervasive than the public realizes.

Brokers can delete complaints under the terms of an arbitration settlement. If a broker settles with a client, he can pay off the client for his or her silence and wipe the slate clean. The NASD says it plans to put an end to this type of action.

Still, the information Weiss' study analyzed is only a snapshot of the industry's problems. Arbitration cases average 17 months or more to move through the pipeline, and the recent technology industry collapse hasn't even hit the books, the Wall Street Journal adds.

There was some good news for customers of Fidelity Investments. They boasted the fewest investor-related actions, just 3.74 per million customer accounts. Credit Suisse Group's Credit Suisse First Boston and Edward D. Jones & Co. also recorded low investor-related actions.

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Martin D. Weiss, chairman of Weiss Ratings, Inc., which reveals safety ratings on insurance companies, banks and brokerage firms, tells the Wall Street Journal that Prudential Securities scored the worst track record in investor abuses based on his study released today. ...
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2002-00-14
Tuesday, 14 May 2002 12:00 AM
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