Investment Malpractice

Video Transcript

Pat Huddleston: this is Pat Huddleston back here again with another session of Investor’s Watchdog University and we are honored again to be joined by Boyd Paige. Thanks for being here again Boyd.

Boyd Page: It’s always good to be here, Pat.

Pat Huddleston: Thanks, man. We just finished a series on scams and scam artists, and then last week we talked, Boyd, about this idea of professionalism in the investment services industry. And so what I’d like to come to today, Boyd, is this – I know you do an awful lot of work for investors. A lot of people come to you and say, “Hey, do I have a claim against my broker or my investment advisor?” When they come to you and you size up the claim broadly, are you having to find fraud in order to tell them they can go forward?
Boyd Page:

Not at all, Pat. In fact, I would say that the majority of our cases aren’t fraud in the absolute sense. What we really describe ourselves as doing is a lot of work that’s basically investment malpractice. It’s a situation where the broker, the financial planner, the financial analyst, the financial advisor has not lived up to the professional standards of conduct that are required of people in the financial services industry. Doesn’t mean that the broker’s a crook.
And I know you’ve talked a lot about crooks. Doesn’t mean he’s a thief. He’s trying to steal from you. It means that he had certain obligations and he just didn’t follow through on them. He tried to cut a corner. He was in a hurry. And we see a lot of cases like that. But, when that happens, when the broker, the financial planner, the financial analyst doesn’t live up to those standards and damage or harm is caused to the investor, the investor has a very legitimate claim to recoup their money and their losses.

Pat Huddleston: Now, when you use the term malpractice, of course, my mind and many viewers’ minds are going to go to the situation of medical practice or legal malpractice. Is there a parallel there?

Boyd Page: Or accounting malpractice. Sure. Again, all of these are professionals. These people in all of those lines of work are responsible for meeting professional standards. Professionals in the financial services industry, likewise, have to meet those professional standards, which govern their line of business. Those include full and fair disclosure, recommending appropriate investments, sitting there and dealing fairly with integrity with their clients and not engaging in violations of the rules and standards, which govern the industry. So, we see a lot of claims that are based on that. One, they are much easier to prove. We don’t have to prove evil intent. We simply prove someone made a mistake, but their mistake cost our client a lot of money.

Pat Huddleston: This may seem a little bit off the topic, but are investment professionals typically insured against malpractice the same way doctors and lawyers are?

Boyd Page: In many cases they are. Now, some firms obviously self-insure, but in many, many cases yes, particularly you find financial planners, and a lot of registered investment advisors, and smaller firms do maintain insurance to cover an appropriate activity and violations of standards.

Pat Huddleston: And what I draw from what you’re saying is that it’s a violation in that they weren’t as careful as they should have been.
Boyd Page: That’s right. They didn’t do what they were supposed to do. I’m held to those standards. You’re held to those types of standards, accountants are, doctors are. And I think it’s important investor’s should realize that when those standards are broken, it’s not your fault that you lost money if the violation caused your damages. Just like if you go to a doctor to be analyzed and he misdiagnoses you; it’s not your fault. Someone should be expected when they’re in this business to live up to those standards and fulfill those duties to investors.

Pat Huddleston: Yeah. Something that just goes along with being in the profession, I guess.
Boyd Page: Part of being a professional.

Pat Huddleston: Okay. Well, thanks Boyd. We appreciate you being with us.

Boyd Paige: Again, look forward to it.
Pat Huddleston: Alright. That’s it for our session of Investor’s Watchdog University today. We look forward to seeing you next week. Until then class dismissed.

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