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SEC's Inquiry Into Stockbroker Abuses

August 23, 1992

We are encouraged by the SEC inquiry into the abuses by stockbrokers, "SEC Launches Inquiry Into Abuses by Stockbrokers" (July 25).

As welcome and long overdue as this inquiry is, it is important to point out that:

* The SEC cannot recover money lost by individual investors through fraud. Their scope includes criminal or civil penalties but they cannot recover money for individuals.

* The California Department of Corporations reports that the United States has more than 3,000 securities brokerages and 550,000 licensed securities brokers. A third of these firms and 20% of all U.S. brokers work in California.

So, while the SEC inquiry of the 50 top abusive brokers and the 50 top abusive brokerage branches is welcome, it is barely able to make a dent in a problem so severe that it has resulted in a 10-year arbitration increase of 600% in case filings from 1980 to 1990.

* Arbitration is the only friend and, indeed, is the best friend of "burned" investors. Securities arbitration is the only avenue abused investors can explore and firms are, thankfully, compelled to honor awards rendered.

We find that "burned" investors want to "throw the broker in jail" or "hang him by his thumbs," which will not put one dollar back in their pocket. Arbitration can address the practical reality and goal of getting lost money back.


Los Angeles

The writer is CEO of Securities Arbitration Group Inc., which represents individual investors in arbitration proceedings.

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