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In prior issues, I informed the reader that under certain circumstances, their "losses in the stock market" can be recovered when they relied totally on their broker's advice, which was later found to be unsuitable for them. It brought back terrible memories of how we all felt when the stock market bubble burst in March of 2000, which wiped out our dreams for the "golden years."

Mr. and Mrs. Jones lost half of their retirement assets. After reviewing their portfolio, I determined that their broker's recommendations were not suitable for a couple planning to retire within a few years.

This is how I represented a client who suffered substantial losses. I will refer to them as Mr. and Mrs. Jones. Mr. Jones worked in an appliance store and was in his late 60s. Mrs. Jones, who was in her late 50s, did office work. They had received an invitation from a stockbroker to attend a free lunch at a nice neighborhood restaurant where they would have an opportunity to hear a financial adviser explain to them how they could enhance their retirement years.

During lunch, the broker convinced the Joneses that his office could design a portfolio for them that would maximize their investment returns, which would give them a better quality of life than they had imagined. He used charts and graphs to illustrate past performance and implied that Mr. and Mrs. Jones could look forward to the same growth of their retirement assets. Because they were not financially astute, they assumed that past performance would be an indication of the future, and couldn't wait to withdraw their money from their CDs and turn it over to their broker. When they opened the account with this new broker, it was clearly indicated that Mr. Jones intended to retire within two years and Mrs. Jones within five years.

Within a two-year period, they had lost half of their retirement assets. After researching the investment vehicles that their broker placed them into, I determined that their broker's recommendations were not suitable for a couple planning to retire within a few years.

The claim with all supporting documents was sent to the Financial Industry Regulatory Authority (FINRA-the regulatory branch of the security industry), where we requested arbitration of the matter. Arbitration usually takes about 13 months for a hearing. At the hearing, the client's case is presented as well as the broker's response. After the arbitrators have heard the arguments, they will determine the award, if any, to be paid to the customer. The decision of the arbitrators is final and not appellable. We decided that rather than wait over a year for a hearing, which was final and not appellable, to instead go directly to mediation. Mediation claims are generally settled within two-and-a-half months. If the parties cannot agree on an equitable settlement, they have the right to proceed to arbitration. Mediation is a voluntary and informal process. The mediator's function is to promote and encourage the parties to negotiate an equitable settlement. If the parties agree on a reasonable settlement, the FINRA will provide a one-paragraph contract which when signed by the parties, must be paid within 30 days.

My client and I agreed to go to mediation, which would take less time and would not be as costly as arbitration. The Joneses understood that if mediation was not agreeable, we could always arbitrate the matter.

At the offices of the FINRA, I gave the opening statement on behalf of my clients and proved that they were not sophisticated investors. I made it clear, that since they had absolutely no knowledge of the stock market, they relied entirely on their broker's advice and that it was fair for them to assume that their broker not only acted in their best interest, but was acutely aware of the short horizon that he had to reach the financial rewards that they expected. I pointed out to the mediator and the representatives of the brokerage house that instead of advising my clients to invest in securities without risk of loss, he placed them in highly speculative stocks with high risk, which were inappropriate for any one approaching retirement. I prepared financial statements for them, showing that they relied entirely on their retirement income to fulfill their life's ambitions, which was now impossible.

The mediator and brokerage firm saw that my client's claim was justified. After several hours of negotiations, the brokerage firm made an offer to my client, which was accepted, and the amount was paid within 30 days. The FINRA was notified that the claim had been settled and that arbitration was not needed. The fees that were deposited with the FINRA for arbitration were returned. The Joneses, after having worked a lifetime and looking forward to retirement, could again enjoy their "golden years."

In the next issue I will cite case histories and the circumstances under which my clients have filed claims against their brokers and have received settlements for their losses.

Howard Hirschhorn is a Certified Public Accountant in N.J. and N.Y., and also an arbitrator for the Financial Industry Regulatory Authority (FINRA). He has represented investors before the FINRA who have received substantial settlements. He can be reached at (732) 566-7671.