By John Lawrence Allen, Special for USDR
Moviegoers might have loved The Wolf of Wall Street, but the Wolf’s victims sure didn’t. Jordan Belfort, the real wolf, didn’t care who he “ripped off” as long as his plunder was enough to satisfy his unending quest for more money, more drugs and more women. The unfortunate victims of Belfort, contrary to what he now claims, were mostly middle class working people who could not afford to lose the money they entrusted to him.
They thought they were living the American dream by investing with a brokerage company that had the inside scoop on “the street.” The closest Belfort ever got to Wall Street was Long Island, New York where he ran his bucket shop. Viewers of the silver screen might enjoy watching the machinations of a serial criminal consorting with prostitutes, drug pushers and securities violators, but those who fell under his spell are still waiting for him to honor his promise to pay them back the money he stole from them.
Unfortunately, they will have a very long wait behind a very long line of victims waiting for Godot. Now out of “club Fed,” the Wolf is on the prowl once again. This time he is making a second fortune selling his lurid tale of scam to Hollywood while charging a large chunk of change to appear in front of audiences who can’t wait to hear all of the sorted details.
White collar crime is a great business; just ask Ivan Boseky or Michael Milken. They too went to “club Fed” and when they got out they made a lot of money on the lecture circuit. In America, white collar crime pays really well. And if you get caught you do a little time playing tennis and pumping iron until you’re ready for your second act.
Many of the victims didn’t get a second act. I know because I represented many of them – school teachers, insurance sales people, chiropractors, and electricians to name only a few. They watched their hopes and dreams vanish while the Wolf continued to play and prey. Early into the maelstrom, I successfully recovered monies for some of these victims, but as the criminal activity proliferated, the ill-gotten gains evaporated as quickly as Belfort could make the next sale.
I became more and more concerned that there wouldn’t be any money left to pay back the later victims, much like those caught in a Ponzi scheme. My fears, unfortunately, proved true and once the scheme was closed down by the SEC, there wasn’t any money left to pay anybody back.
There are lessons to be learned from this tragic tale. They won’t guarantee that you will avoid becoming another casualty, but they will go a long way in inoculating you from securities fraud. First, do business with someone you know personally or with a person recommended by someone you trust. Always check them out by going to the FINRA website at brokercheck.finra.org. You can find out if the financial advisor has any arbitration claims, bankruptcy proceedings, civil claims or securities violations.
Also check out the brokerage company to see what, if any, problems they may have. You will probably have an added layer of protection by dealing with a large, well known company. They have compliance departments that are there to protect the company and its clients – you. This will not protect you from stockbroker incompetence or bad advice, but you probably won’t be caught investing in any scams.
Wall Street is no different from the garment industry. It goes through fads as quickly as the rag business changes styles. Don’t get caught up in the latest craze. Tens of thousands got burned in the mortgage debacle during the 2008 crisis. Everyone thought you could earn extra returns from sub-par mortgages packaged together. It truly was too good to be true.
If you have been the victim of investment fraud don’t fret. You have the opportunity to recover your losses through FINRA arbitration. Check out arbitration on the FINRA website at finra.org. Go to the arbitration and mediation tab and read about the arbitration process. FINRA has recently changed its rules regarding small claims. If you lost $50,000 or less, you can proceed under the simplified arbitration rules, otherwise known as small claims arbitration. You won’t have to appear in a hearing, you won’t have to testify and you won’t spend a lot of money. And best of all you will generally receive a result in about seven months – truly quick justice.
I would suggest that you speak with an attorney who is an expert in the FINRA process. Don’t call up an auto crash lawyer for advice. FINRA arbitration is quite different than a court or jury trial and requires an attorney who understands the rules, regulations, customs and practice of the brokerage industry. I can promise you the larger your loss, the more competent the attorney opposing you. Brokerage firms know the territory well, you will need an attorney proficient in prosecuting securities fraud claims.
Securities fraud encompasses the giving of bad advice. Many investors don’t know that they can sue a brokerage company and its financial advisor for making unsuitable investment recommendations (giving bad advice). FINRA requires that its brokers “know their customers.” They must match the client’s investment goals, risk tolerance, time horizon and other pertinent information with the correct product and/or stock. If they don’t, they can be held liable for making unsuitable investment recommendations.
Finally, don’t wait too long to prosecute your claim. FINRA has a six year eligibility rule that bars any claim arising more than six years from the event giving rise to the cause of action. These rules are complex and you should speak with a qualified arbitration attorney to make sure that your rights are protected.
John Lawrence Allen represents investors nationwide in securities arbitration, and is the author of the upcoming book, Make Wall Street Pay You Back. If you believe that you have been defrauded or received bad investment advice visit his website at MyInvestorFraud.com or email him at jlallen@MyInvestorFraud.com.