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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76398  
Subject: Re: Too many thinly traded stocks - broker abuse Date: 12/7/2007 12:46 PM
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I think there's a couple ways to look at this, but I, personally, disagree with Paul's response. Let me lay out why.

- First, making a play in a sector is one thing, but it being the entirety of a $1 million+ account is quite another.

- Second, even ignoring the overall strategy concern, the fact that it was apparently, solely in securities for which this company makes the market - and takes home a good chunk of change in the process - is highly suspicious. You mean that an honest analysis just happened to identify only those stocks that made his firm a profit w/o commission? I'd need an awfully large grain of salt to take that.

- Last, you said that "it does require some patience". The guy was 84! Patience is a strategy for people with years.


That said, there's only one factor I can identify that protects the broker from being horribly irresponsible - and that is that there was another $1.6 million sitting elsewhere, hopefully in a more appropriate asset allocation for his needs. Your relative may very well have considered that his play money, and given the broker the ability to take risk with it as he desired. Or, at least, its reasonable that it may have occurred and probably impossible to prove otherwise.

If I were you, I'd do two things:
1) Assuming you have the authority, move the stocks to another account before selling, and sell slowly enough to not effect the market price. If the spread is really that great, and you can find a broker who can handle it, it may be possible to sell the shares privately, rather than in the open market.

2) Consider filing a complaint with the appropriate industry regulatory authority. You can't know that the strategy wasn't approved, but the fact that he was concentrating only in stocks that his firm made a market for, is highly suspect. Even if nothing comes of it, he deserves to have a complaint on his records, so people who do the research can know about the conflict of interests.
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