In today's featured FINRA public customer arbitration, we got a frustrated Interactive Brokers customer. Apparently, this customer telephoned his brokerage firm and didn't get the best or clearest answer to his questions; however, the firm had a policy of not providing advice to self-directed customers and that was the nature of the customer with the questions. So . . . what happens when a customer who is supposed to handle his own trading asks for help from a firm that says it doesn't provide advice? Does the firm's policy give it license to offer incorrect or confusing answers? What if the desired order wouldn't have gotten filled regardless of the advice given? What if you can't get no satisfaction?
Case in Point
In a FINRA Arbitration Statement of Claim filed in March 2022, public customer Claimant Miller, representing himself pro se, asserted inaccurate and
incorrect guidance; misrepresentation and omission; failure to execute; and execution error. Claimant Miller sought $27, 192 in compensatory damages.
In the Matter of the Arbitration Between Chris Miller, Claimant, v. Interactive Brokers LLC. Respondent (FINRA Arbitration Award 22-00504)
The FINRA Arbitration Award characterizes Miller's claims as relating "to Tesla Stock." Respondent Interactive Brokers generally denied the allegations and asserted affirmative defenses.
Sole FINRA Public Arbitrator Kenneth Dymond denied Claimant Miller's claims. Mindful of Claimant Miller's pro se status and clearly mindful of the importance of his adjudicatory role, Arbitrator Dymond penned this thoughtful and articulate rationale:
ARBITRATOR'S EXPLAINATION OF DECISION
Inasmuch as Claimant is appearing pro se, I believe the interests of the parties is
served by this short explanation of my decision. The Claimant is seeking damages and
imposing liability on the Respondent essentially based on two theories of the case: (1) he
was misinformed by the Respondent's employee regarding the difference between a stop
order and stop limit order and, (2) the Respondent failed to execute his order as required
by his instructions. These actions resulted in his damage claim which is essentially the
difference between the price if the order was executed and the price of the security below
the directed price. At the outset it must be noted that the Respondent's business model is
that all customer accounts are self-directed, and the account agreement specifically
provides that the Respondent does not provide advice regarding trades or management
of the account.
The Claimant asserts that in a telephone conversation with an employee, he was
provided with faulty information concerning how to execute a trade to accomplish his
goal. That conversation is reflected in the record and while I do not find that it is a model
of clarity and can understand the Claimant's frustration, I do not find that it is incorrect or
so egregiously inaccurate as to impose liability. More importantly, the customer's account
as noted above is self-directed, and as such imposes greater burden on him in terms of
The web-based platform does provide clear and concise explanations of trading terms
and strategies and was available for use. Under these circumstances, the Claimant
cannot prevail under the theory of misinformation. With respect to the failure to execute a
trade as per his order, the record does not support this theory as well. I am not impugning
the integrity or credibility of the Claimant, but the documentary evidence does show that
the trade order was attempted to be executed but market conditions precluded a
completed sale due to the restrictions of the stop limit order. It is unfortunate that the
Claimant could not have the trade completed according to his intent but the business
model of the Respondent, which is fairly common in the industry precludes liability in this
matter. A final word on the actual claim for damages is appropriate. I again understand
the frustration of the Claimant, but the law does mandate mitigation of damages and it
appears in this case that the security in question sold well above the Claimant's selling
target price shortly after the issue arose. If the imposition of liability were appropriate, I
would be bound to apply the rule regarding damages. Based on the foregoing, I find no
basis to impose liability on the Respondent and dismiss the claim.
at Pages 2 - 5 of the FINRA Award
Bill Singer's Comment
Public Arbitrator Dymond noted that Interactive Brokers' "business model is that all customer accounts are self-directed . . . [and] that the Respondent does not provide advice regarding trades or management of the account; " however, the Arbitrator also noted that:
The Claimant asserts that in a telephone conversation with an employee, he was provided with faulty information concerning how to execute a trade to accomplish his goal. That conversation is reflected in the record and while I do not find that it is a model of clarity and can understand the Claimant's frustration, I do not find that it is incorrect or so egregiously inaccurate as to impose liability. . . .
at Page 2 of the FINRA Award
Which presents an intriguing dilemma: What's the proper response from your brokerage firm if it does not provide trade advice?
Figure it out yourself smart guy-- we don't give advice.
We don't give advice but, based upon what you're saying, you might want to try a Stop Order or maybe a Limit Order but, sorry, I gotta get the other call, really busy day, best of luck.
Apparently, Miller wanted to enter some kind of trade, which might have taken on the form of a Stop Order; however, if it had been presented to the Market, the order would not have resulted in a Fill. That's a common occurrence. As any self-directed trader knows (or should know), there are many variations on contingency orders, and if you don't quite enter the parameters correctly, the results can be disastrous.
What I like -- what I love -- about Arbitrator Dymond's Explanation of Decision is that you see his struggle with what Miller wanted, what Miller was entitled to, what Interactive Brokers told its customer, and what was the obligations and rights of the respective parties. Arbitrator Dymond concluded that notwithstanding Claimant's frustration, the intended trade would not have been executed as desired because "market conditions precluded a completed sale due to the restrictions of the stop limit order." Ah yes, that old lament of not getting no satisfaction no matter what you do or don't do.