Lehman: The investment that keeps on taking

A client of Citi Smith Barney has lost his case against the firm and his broker over a recommendation in spring 2008 that he buy preferred shares of Lehman Brothers.

Alphonse Lucchese initially sued in civil court, but the case was punted to an arbitrator with the Financial Industry Regulatory Authority (FINRA).

Lucchese said he bought $100,000 worth of Lehman stock against his better judgment. By September 9, 2008, the value had slumped to $37,000 and he told his broker he was “amenable” to booking the loss. By September 15, the position was worthless.

His broker said he was given no explicit instruction to sell, and did not place the order.

The arbitrator agreed with the broker, and ordered the Lucchese to pay the broker’s legal fees to boot.

The lesson is clear: When your client wants to book a loss, they should not tell you they are amenable to it; they should tell you to sell.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.