The bankruptcy of Lehman Brothers Holdings Inc. (NYSE: LEH), the sale of Merrill Lynch & Co. (NYSE: MER) and the strain on American International Group Inc. (NYSE: AIG) have put an unprecedented strain on the financial system. Investors looking for a way to recoup their losses are probably out of luck.If you lost money owning shares of financial services companies, odds of getting your money back are remote. To prevail in an arbitration hearing, investors need to prove fraud such as the broker bought stock without their knowledge, bought stock just to generate commissions (churn), bought it knowing that it was unsuitable, or misrepresented the risks of the investment. These claims are all difficult to prove and even if an investor is victorious, there is no guarantee they will get a full refund.
According to New York securities attorney Mark Astarita, arbitration cases take between 14 and 18 months to resolve. Investors win about 50% of the time. "Stocks go down every day," he said when we spoke earlier today. "There needs to be wrongful conduct" to win a case.
The picture for people worried about their brokerage accounts is brighter. Broker-dealers are required by both SEC regulations and the law to be members of the Securities Investor Protection Corp., which protects customers' money in a manner similar to the way the Federal Deposit Insurance Corp. protects depositors at banks. The SPIC, however, works to return consumers' money if a brokerage firm goes out of business or experiences other sorts of financial difficulties. It won't bail out investors if their investments tank.
Chances are that many investors have no one to blame but themselves for the plight of their portfolio. Many people fail to properly diversify their holdings. They chase short-term gains without taking into account the long-term consequences.
Also, be leery of people offering simple answers to complicated questions such as whether financial stocks have hit a bottom. The scariest part of this market meltdown is how much we don't know.
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Reader Comments (Page 1 of 1)
9-15-2008 @ 12:01PM
David Pedjoe said...
We The People: Are They Telling You To Buy S&P and OEX Put Options In The Market? Because That Is How You Hedge Your Bets, and You'll Make Mucho Dollars.. In A Put Option. Sell It As Soon As It Hits Botom and Starts Rising Again.
9-15-2008 @ 7:15PM
Steven W DiTrolio said...
Buy low sell high. one and one adds to two. Not what you want it to.The people who go back to basics will be the people who will come out on top.
9-15-2008 @ 7:38PM
a2880brian said...
Dick Fuld sold huge amounts of his shares in Lehman at the end of last year (2007)when it's shares were at thier highs.... MIllions and Millions and millions.
He was telling everyone in the world and at Lehman that everything was perfectly fine and NOT to sell their shares.. Does anyone else see the need for an INVESTIGATION OF DICK FULD?
9-15-2008 @ 7:32PM
Mary-Ann Neri said...
So, investors brought this on themselves. did they? The greatest minds in money didn't see this coming but it is the little guy's fault. Whether you diversified or not, it you have a significant amount of money in the market now you are hurting. Even if you did everything right.
Talk about passing the -ever shrinking - buck.
9-15-2008 @ 9:42PM
hannelore said...
oh jes here we go again...dick fuld, how com he sold ,millions in o7, , we bin told lehman stands like a rock....my live long saving of 25.000 dollar down the .....to find out only on friday the 12 sept
things going bad. i could have sold my live long saving for $ 15,538...the next day ,but......the week end made them do it.....and a thanks, for refusing to help...
9-16-2008 @ 8:27AM
evelyn rider said...
Are Bonds with lehman worthless?
9-16-2008 @ 8:48AM
swdavis125 said...
Helllooo out there. Doesn't anyone think that the sub-prime lenders should bear the brunt of this crisis. That is where it started. When you lend money to someone who can't afford to pay it back anyway don't you think something is wrong? And to top it off the biggies bought into it and invested our monies in this scam. Where was our protective government in all of this?
9-17-2008 @ 11:34AM
Shirlie said...
Can you get your money if you have an annuity with AIG?