Due Diligence

Traditional Defense Fails in Smith Barney vs. Client Arbitration

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SocialJusticeI just caught up to an article in last weekend's New York Times, that says that arbitrators awarded $54.1 million to the clients in a securities arbitration case against Smith Barney. The clients brought claims against the firm after they were sold municipal bond investments that were billed as higly conservative investments, but that turned south during the financial crisis. Remarkably, the article by Gretchen Morgenson notes, the arbitrators rejected 3 typical defenses offered by the firm.

1) Blame the financial crisis--not us!

2) Wealthy and sophisticated investors understand the risks.

3) The prospectus warned they could lose all their money.

(Check the New York Times for the full story)

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