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As of September 1, 2008, Vincent DiCarlo, who maintained this site, is no longer engaged in the private practice of law. His former law office website is at.
This site is no longer maintained, may no longer be accurate,and is provided for historical purposes.  See disclaimer below.
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Failure to Follow Instructions


Whether your account is discretionary or nondiscretionary, your broker or investment advisor has a duty to follow your instructions with respect to your account. If he fails to do so, you have a claim for any losses that may result.

Two common examples of instructions that may not be followed are:

The first scenario is most often seen where a broker for a boiler room operation induces an investor to buy a stock that is being promoted by the boiler room. Because the boiler room is usually trying to pump up the price of the stock, at least until they pull the plug, its brokers often strongly resist instructions to sell the stock. Often they will first attempt to convince you that it is a bad time to sell or that the stock is about to rise again. If that doesn't work, they may simply fail to follow your instructions. This can result in catastrophic losses when the price of the stock collapses, as it almost invariably does.

The second scenario is also surprisingly common. I suspect that the reason why some brokers resist instructions to stop using margin is that the instruction usually comes after a decline in the market. If the broker is convinced that the decline is a temporary correction, he may not want the investor to lock in a substantial loss. Of course, if the broker is wrong and the portfolio continues to decline, the result may be a total loss.

Regardless of the scenario, where the failure of a broker or advisor to follow a customer's instructions causes a loss, the investor has a claim that may be worth pursuing.

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DISCLAIMER: Vincent DiCarlo, who authored and maintained this site, has entered government service and, as of September 1, 2008, is no longer engaged in the private practice of law.  Therefore, this site is no longer being maintained,  may not be accurate, and should not be relied upon.  It is not now and was not ever intended as legal advice.  It is being provided for historical purposes, and for the benefit of those lawyers who are capable of independently verifying the information and judging the opinions in it, and then reaching their own conclusions.  You are strongly advised to consult qualified legal counsel before adopting any of the ideas or suggestions in this material, which may or may not be applicable in your jurisdiction or to your specific situation, and may no longer be accurate or prudent in any case.  The opinions and statements at this site were solely those of the author.  They were not and are not those of, nor were they nor are they made on behalf of, any agency of government or anyone else.

Copyright © 1998-2008 Vincent DiCarlo