Order Failure is when an investor gives an order and the brokerage firm fails to execute it.
Order failure cases are rare, because in the absence of documentary evidence of the order, they are tough cases to win. Nowadays, however, more and more brokerage firms, particularly the online only firms, record conversations of clients. Therefore, the order can be proven more easily. The problem is that often we cannot obtain the recording without filing an arbitration case.
Oftentimes, the only documentation consists, not of the order itself, but the communication to the broker after the order failure. Let’s say a customer conveys an order verbally on the telephone and the customer learns the next day or shortly thereafter that the order was not entered. There is no record of the order. But the customer sends an email to the broker to the effect of, “Hey, why didn’t you enter the order I told you to enter yesterday?” Even though the communication does not give the specifics of the order, it would be tremendously helpful in establishing that an order was given.
A contemporaneous note by the customer can also be smoking gun evidence that an order was given. I currently have a securities arbitration case against Scottrade where my client claims the Branch Manager gave him advice on a specific security, telling him it was “hot” and a “good move” to be buying it. Scottrade is defending the case with it’s many agreements that state that its brokers do not give advice. My client happened to find a note that he made when he first spoke to the Branch Manager that has handwritten on it the Manager’s name, the security symbol and the words “HOT” and “Good Move”. This note will be crucial evidence in proving what the Branch Manager said. Likewise, a handwritten note of an order that is provided to the broker would be as persuasive. Though not required by any means, it is always helpful when customers make written notes about what is transpiring with the broker and the firm.
Order failure cases also encompass situations where the broker enters the customer’s order but not at the proper price or not timely enough.
Though “order failure” is a well-recognized type of securities claim, it’s not even listed by FINRA on its statistics page for FINRA arbitrations. FINRA lists the following type of cases:
- Breach of Contract
- Promissory Notes
- Breach of Fiduciary Duty
- Libel, Slander or Defamation
- Libel or Slander on Form U-5
- Wrongful Termination
- Discrimination or Harassment
- Omission of Facts
- Unauthorized Trading
Several of the above categories relate only to industry disputes – firm v. broker, such as Promissory Notes, the two Libel categories, Wrongful Termination and Discrimination or Harassment.Order Failure would likely fall under Breach of Contract and Negligence
If you have lost money because of order failure, be sure to hire a highly experienced lawyer to fight for your interests.
Stoneman Law Offices - Texas & Colorado. (800) 783-0748 Free Consultation - Representing Clients Nationwide