Most people know that the word "speculate" means to guess at something one does not actually know.  What most people do not know, is that brokerage houses know that their customers may become their enemies.  Brokerage houses know this from experience, especially the more than average dishonest ones.  And in order to protect themselves, they put special "code words" in the forms that they require their customers to sign, such as "growth," "aggressive," and "speculative."  The stockbroker normally fills these forms out and then presents them to the client to sign.  If the client asks a question, the broker will say, "My supervisor says that if you do not sign this, I cannot sell you a mutual fund, so it is just so that I can provide you with the best range of options" or "if you don't sign this, all I can do is offer you a deposit account."

Words like "growth," "aggressive," and "speculative" are really code words, for if a client who has suffered losses claims that he or she was defrauded, the broker will produce the forms that the client signed, and point with indignation at these words, and argue, with conviction, that the client admitted to being a gambler, and having made that admission, cannot complaint over having lost the "bet."  "He got exactly what he bargained for."  "You go to the track, and you may come back a loser." 

Investors who have signed such forms should not be deterred.  The "code word" defense is really a scare tactic.  The reason is that by law, the broker is required to recommend only investments that are appropriate for the investor, and whether an investment is appropriate or not is not determined merely by a form filled out by the broker.  This is also known as the "suitability rule," which really means that a stockbroker is supposed to recommend investments that are really good, not just ones that pay a larger commission.

If you have concerns about the dealings you have had with your stockbroker, please call us at 1-800-306-6010 or contact us online.