After 20+ years of representing individual investors in Wall Street disputes, I have heard hundreds of defense arguments presented by Wall Street attorneys. Some of the arguments are presented in a reasoned, thoughtful and compelling manner supported by the facts and the law. Some other arguments, not so much.
One patently ridiculous argument is known as the “Wealthy Client” defense. The argument goes like this:
- The client has substantial assets;
- Because of the client’s considerable wealth, the client must be a sophisticated investor;
- As a sophisticated investor, the client must have known what was happening in the investment account;
- Since the client did not complain earlier, the client must have agreed to all of the activity in the account;
- The losses are a small percentage of the client’s total net worth; and,
- Even if the broker or the brokerage made a mistake, the client can afford the loss.
To appreciate the absurdity of this argument, apply the Wealthy Client argument to other types of disputes.
In a contract dispute: a wealthy homeowner enters into a contract with a landscaper; the landscaper fails to perform and breaches the contract, the homeowner suffers economic losses because of the breach; the homeowner is wealthy and can hire someone else; so the landscaper is not responsible.
Or an auto accident: A wealthy driver is stopped at a red-light and another driver smashes into the rear of the wealthy driver’s vehicle (probably texting at the time). The wealthy driver’s car suffers extensive property damage. The other driver argues he or she is not responsible because the wealthy driver can afford to repair the vehicle.
As incredible as it sounds, the Wealthy Client defense is presented in FINRA arbitrations. This is so because FINRA arbitrations are private and not public proceedings. You can say a lot of really senseless and offensive things behind closed doors and not be subject to public scrutiny. The law does not allow the Wealthy Client defense to prevail. You should not allow it either.
(Mark Brewer of Investment Recovery Counsel has represented hundreds of individual investors and seniors in Wall Street disputes since 1994. Mark Brewer can be reached via email at firstname.lastname@example.org)