NCJ Number
59494
Journal
Trial Volume: 15 Issue: 7 Dated: (JULY 1979) Pages: 56-59,69
Date Published
1979
Length
4 pages
Annotation
GUIDELINES FOR REPRESENTING CONSUMERS IN LAWSUITS AGAINST SECURITIES BROKER-DEALERS ARE PRESENTED IN PART 2 OF A SERIES ON RETAIL SECURITIES FRAUD DIRECTED TO ATTORNEYS.
Abstract
THE PURPOSE OF THE SERIES IS TO PROVIDE ATTORNEYS WHO ARE NOT SPECIALISTS IN THE SECURITIES FIELD WITH AN INTRODUCTION TO THE ELEMENTS OF RETAIL SECURITIES FRAUD AND TO FACTORS IN HANDLING INVESTORS' LAWSUITS. THE MAJOR FRAUDULENT ACTIVITIES OF CONCERN ARE CHURNING (GENERATING EXCESSIVE TRADING IN AN INVESTOR'S ACCOUNT FOR THE PURPOSE OF EARNING PROFITS FOR THE BROKER-DEALER) AND UNSUITABLE RECOMMENDATIONS BY A BROKER-DEALER TO AN INVESTOR. IT IS POINTED OUT THAT THE MOST IMPORTANT DETERMINANT OF A PLAINTIFF'S SUCCESS IN A FRAUD SUIT IS THE SECURITIES EXPERIENCE OF THE PLAINTIFF--WHETHER THE PLAINTIFF WAS SUFFICIENTLY NAIVE ABOUT SECURITIES TRANSACTIONS TO ENABLE THE DEFENDANT BROKER-DEALER TO UNDERTAKE THE FRAUDULENT ACTIVITIES IN QUESTION. DEFENSES RAISED IN FRAUD CASES (STATUTE OF LIMITATIONS, LACK OF PRIOR COMPLAINT BY THE INVESTOR, THE INVESTOR'S FAILURE TO MINIMIZE HIS OR HER LOSSES ONCE THE FRAUDULENT ACTIVITY BECAME KNOWN, EXISTENCE OF A WARNING OF EXCESSIVE TRADING BY THE BROKER TO THE PLAINTIFF, OVERALL PROFITABILITY OF THE PLAINTIFF'S ACCOUNT) ARE REVIEWED. ISSUES THAT COMMONLY ARISE IN SECURITIES LITIGATION (BURDEN OF PROOF, EXPERT TESTIMONY, WHETHER TO SUBMIT TO ARBITRATION RATHER THAN FILE SUIT) ARE DISCUSSED, WITH PARTICULAR ATTENTION TO THE ADVANTAGES AND DISADVANTAGES OF ARBITRATION. SEE NCJ-58055 FOR PART 1. (LKM)