Broker or mutual fund: Suing your fund is suing yourself. A broker is someone who acts as your agent, buying or selling securities for you. However, like real estate brokers, they are buying or selling things that belong to other people, acting as middlemen.
When you invest in a mutual fund, you are buying a piece of the fund. Even if the fund then turns around and invests its money in stocks and bonds, what you own is a piece of the fund, not the underlying stocks and bonds. It's like investing in a business that happens to own real estate - you own a piece of the company, not a piece of Main Street says California Business Lawyer Steven C. Peck.
The reason this is a critical distinction is that mutual funds can use their money - which is really your money - to defend themselves from a lawsuit. That means that when you sue them, they hire their lawyers and experts, pay court costs and - if they lose - pay damages with your money. In some ways, therefore, you are suing yourself indicates California Business Attorney Steven C. Peck.
If you're a smaller investor, even though your money is a piece of the fund's money, it's only a small piece. If you think the fund did you dirty, it still makes sense to sue, because your money will be less than 1 percent - or less than 1 percent of 1 percent of 1 percent - of the fund, and most of the expenses will be borne by the other investors.
However, this "shoot the hostages" feature of mutual funds deters large institutional investors, such as pension funds, from suing. In other words, the institutional investor owns a large enough percentage of the mutual fund that suing can becounterproductive.
Brokers and their bosses or companies - sue 'em all and let the courts sort it out. Speaking of, "Whose money is it?" and, "How much money is there?" if you think you have a cause of action, sue the brokerage - your broker's boss or employer - as well as your broker says Los Angeles Business Attorney Steven C. Peck who may be contacted toll free at 1.866.999.9085.
The brokerage will have much deeper pockets as well as more at stake than an individual broker will. An individual, even a successful broker, may not have enough to pay your claim if you win. They may also find it to their advantage to simply declare bankruptcy or otherwise fold their tent and walk away if there's a large settlement against them. It's a much better bet that you'll collect from a business worth millions or billions.
And, no, suing your broker's boss isn't only about having access to deeper pockets. Your broker's supervisor has an obligation to supervise your broker, especially if they knew or had reason to know - such as from prior complaints, or your broker's previous work history - that they really should have been supervising him or her closely. A failure to supervise is actionable.
More generally, businesses are often responsible for the actions of their employees, at least actions taken within the course of business - which for a brokerage means: when brokers trade stocks.
Contact Steven Peck's Premier legal toll free at 1.866.999.9085 to talk to an experienced California Business Law Attorney and visit us on-line at www.premierlegal.org.
