Kevin and Natalie Flynn have filed a FINRA arbitration claim against TD Ameritrade alleging that the firm violated FINRA’s “know your customer” rule, recommended unsuitable investments and failed to supervise its registered persons. The claim alleges $500,000 in losses.
Kevin Flynn is a 60-year-old former salesman who suffered spinal damage relating to a car accident and its subsequent treatment, going back twenty years. His 51-year-old wife, a former nurse, has been diagnosed with a Lupus-like disorder. Neither has been able to work for years. They have an 18 year-old daughter.
In 2010, Flynn went to a TD Ameritrade office in Manchester, NH, looking to invest the couple’s disability settlements. Flynn told a TD Ameritrade rep they were looking for someone to manage their funds. The rep told the Flynn’s about the firm’s “thinkorswim” trading platform.
TD Ameritrade’s website describes “thinkorswim” as a trading and analytical platform which allows self-directed investors and traders to find trading opportunities. It goes on to state that “elite level trading tools and powerful resources” will “help you nail even the most complex strategies and techniques.” One commentator states that thinkorswim offers a chat room full of traders sharing tips and strategies.
According to Mr. Flynn, “[w]e were looking for someone to manage [our funds], and the rep told us about these chat rooms where you do just what they do…It was very fast, the way they traded.” According to the claim, Flynn began making trades through chat rooms called “shadow trader” and “first wave.” The chat room leaders selected various ETFs, option trades and other strategies. Flynn found it difficult to follow who exactly were the leaders and the jargon that was used by leaders/participants in the chat rooms.
The claim alleges the Flynns reached out to the firm four times for assistance but never received a response. Brokers may also have a duty to correct a client’s “erroneous beliefs” about the safety of trading or for failing to stop the client from continued trading once aware of these erroneous beliefs.
The duty to provide adequate warnings about even the customer’s own investment strategies is particularly important when the customer is trading on margin.
Under these circumstances, the broker may have an affirmative duty to cut a customer off, and stop what has become to be known as “financial suicide.”
This case would appear to be an example of a firm providing faulty advice or guidance to an unsophisticated investor. Indeed, while TD Ameritrade’s website touts the features and advantages of the thinkorswim platform, one industry commentator makes clear that thinkorswim is “best” for “advanced investors,” “frequent traders,” “ETF investors” or “option traders.” Given that the Flynn’s were both disabled and unable to work, still relatively young, and with a dependent child, exposing their retirement savings to an investment program “best” for frequent traders and option traders reeks of unsuitable recommendations.
Guiliano Law Group
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