The Securities Industry Is Rife With Conflicts Of Interests


Although daily media blitzes and TV advertisements portray brokers as trusted independent investment advisers only interested in their clients’ success and retirement, the securities industry is often in direct conflict with the interests of its clientele. All too often individual brokers are pressured to steer their clients into investing in securities pushed by the broker dealer. A conflict of interest exists when brokers recommend clients to invest in a particular investment not because it is suitable but because of the fees, compensation or other pecuniary benefits generated.

Mr. Dennin has a history of exposing such conduct and holding the securities industry accountable. A conflict of interest can arise when brokers are encouraged to recommend a particular company’s security to clients because the broker-dealer stands to gain financially by underwriting the company’s securities. In the mid-2000s, more than one hundred cases were brought against Merrill Lynch alleging that the retail brokers recommended clients to purchase Tyco stock in order to secure lucrative underwriting fees through Merrill Lynch’s underwriting of Tyco stock. 99 percent of the cases that went to trial against Merrill Lynch resulted in a zero recovery on behalf of investors. Undeterred, Mr. Dennin tried a case against Merrill Lynch and Merrill’s “star” securities analyst Phua Young. The case involved the undisclosed conflict of interest between the retail broker’s recommendation to purchase Tyco stock and the positive coverage of Tyco stock by Merrill Lynch and its analyst, and the hefty fees received and expected to be received through Merrill Lynch’s role as Tyco underwriter. After trial, Mr. Dennin obtained full compensatory damages in excess of $621,000 including $240,000 in punitive damages against Merrill Lynch and Mr. Young.

Mr. Dennin has also received an award after trial against Charles Schwab ($437,000 – twelve times the out of pocket loss to the client, $144,000 in attorneys’ fees, $151,00 in interest and $27,000 in costs) in connection with the sale of the Charles Schwab High Yield Fund, the largest Ultra Short term bond fund in the United States.

Mr. Dennin has successfully obtained millions of dollars on behalf of his clients against UBS in Puerto Rico in connection with UBS sale of UBS Puerto Rico closed-end funds in which UBS wore many hats, investment adviser to the CEFs, underwriter of the CEFs and financial adviser to the retail client. These cases alleged conflicts of interest relating to UBS’ various roles and substantial fees related thereto.

If you suspect that you may have been duped by your broker engaging in conflicts of interests call 866-437-9475 or email our office.