Broker Error - Arbitration -sec - Customer Agreement - Legal Opinions

C

cowpok1027

I'm no "newbie" but I've never had occasion to go beyond complaining to a broker over an error that they made.

This thread's purpose is both to seek advice & counsel on my "problem" AND to provide a forum for others to do likewise.

I encourage all to share their experiences & knowledge with the proviso that this is
SERIOUS BUSINESS & jokers & fabricators are not welcome

Thank You.

(My PROBLEM TO FOLLOW IN separate POST).
 
MY PROBLEM :

In December, 2006 I found news within minutes of its release of a small (NASDAQ:BB listed) bank's (hereafter referred to as B1) takeover proposal by a neighboring bank(hereafter referred to as B2) @ $25/share in either in cash or equivalent (adjustable) shares of the acquiring bank.

I checked the quotes & found B1 was quoted @ approx $24 & tried to place a buy order @ my primary broker who would not accept the order because it was not DTCC eligible. So I placed a buy order @ my 2ndary broker - A LIMIT ORDER @ $23.60 and was executed @ $26 (the high price of the day & as far as I can tell the only execution of the day or anytime thereafter ABOVE the takeover price).

Naturally I complained but got no satisfaction.

I waited, hoping B2 would trade up else I'd take the $25 & eat my loss.

In May, 2007 the proposal was voted on favorably & the deal completed on 5/31/07.

During May I asked why I received no proxy but got no satisfaction.

Finally, in late August I got the proceeds credited to my account (B1 had been held in RESTRICTED mode throughout the period May thru August). This followed further complaints with no satisfaction & misinfo & delays in dealing with the issue.

I've now heard from the broker's Compliance department claiming they did everything A OK; they blamed the Transfer Agent for the failure to provide any info regarding the vote/election of cash or stock.

They also referred to the CUSTOMER AGREEMENT as placing all responsibility for "making things happen" regarding the reorg on me. NOTE: the B1 stock was held in "STREET NAME" & their REORG DEPARTMENT does not take phone calls or respond to customers directly; however, recently they did thru a broker rep deliver a warning that I should not attempt to contact BROADRIDGE FINANCIAL SERVICES. They claimed BROADRIDGE FINANCIAL SERVICES were the agent distributing proxy material on this. NOTE: this followed my call to BROADRIDGE FINANCIAL SERVICES for confirmation that they acknowledge that they did not distribute the proxy material as the broker claimed.

QUESTIONS?
 
Quote from cowpok1027:

... So I placed a buy order @ my 2ndary broker - A LIMIT ORDER @ $23.60 and was executed @ $26 (the high price of the day & as far as I can tell the only execution of the day or anytime thereafter ABOVE the takeover price).
More...
Never seen that happen in almost 10 years of high frequency swing trading exclusively using limit orders. Except perhaps in the case of a trading station f-up, as in someone clicking "modify order" too fast/too many times on IB TWS and having the famous "magenta messup".

But then, maybe I'm just lucky... :cool:
 
Hi Wayne -

Yea. I agree & I've been trading for over 40 years.

It almost smacks of fraud to me, especially in light of the way they have handled it.

It was obvious that their Compliance Dept did no more than ask their Reorg Dept what happened.

They've never answered the "trade" question.

I'd hate to switch cause I've mastered their software & set it up for my trading (done mostly with my #1 broker - IB).

I'm hoping to generate some suggestions as to how to get a decent settlement and/or what to do legally if not + who to consult on what to do legally.

I'm considering involving the SEC.

Thx for the response.
 
Sorry I don't have any insight into your problem. I've luckily avoided buyouts (except for getting slammed on some shorts!). I'm just amazed they stuck you with that bad fill.

Any solid proof you sent in the correct order (like you can get with the IB Audit Trail info) at that other broker? Should be a slam dunk at arbitration, if you can get there, that is. Was it a lot of money, IOW worth hiring a good securities lawyer and filing suit (lots of others maybe didn't get the proxy info, class action status?)?

Good luck with your problem.

Regards. :cool:
 
HI WAYNE -

The $$ was < $1000 so a lawyer isn't likely to be interested.

Since I don't know how to "prove" I entered a limit order or the price thereof I am probably stuck - altho anyone using just plain common sense would not buy a stock being taken over at a price higher than the offer unless they had reason to believe a higher offer was at least a good possibility (I would not have any such expectation about a small bank located in another state).

Thanks again for your interest
 
Your broker is likely not responsible for the fill for several reasons. First off, the broker does not fill the trade. The trade is matched by an order matching engine, which the broker has no control over. Secondly, If you are trading electronically, you've undoubtably signed an electronic trading agreement, which basically says they are not responsible for anything that happens to your electronic order.

Now if they are guilty of some sort of fraud, you have much bigger issues to worry about.
 
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