Theory vs. Reality

Theory vs. Reality
In an ideal world, if you have a good case, you or your lawyer would write to the broker explaining the situation and requesting that they pay a certain amount of compensation or make a fair offer. The broker would face the realities of the situation and act with integrity, offering you a reasonable sum.

If the broker genuinely believes you were mistaken, they would explain why, and back it up with financial or legal evidence.

Unfortunately, we do not live in an ideal world and nothing makes a broker's blood run cold (or perhaps hot) more than a damages claim. The amount of money involved is generally not trivial and there is often a fear of "the floodgates opening," as you are probably not the only client in this position.

It is also human nature that people are reluctant to admit they are in the wrong, no more so when this affects their pocket. Last, but very definitely not least, the civil law system has some intrinsic flaws that can be exploited by the unscrupulous and/or desperate.

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So What Actually Happens?
In many or most cases, the broker will deny absolutely everything with arguments that will make your own blood either boil or freeze. The defenses will range from blaming you, the market, or both, to distorting the figures or the laws, the logic, or anything else that shifts the liability for the losses away from the broker. This first response will generally be presented as one of injured innocence.

If you push further, it will get nasty. Despite legal and ethical obligations to treat complaints fairly, this is also a theoretical ideal that is often totally disregarded in practice. The unstated and sole objective of the broker is to avoid (or evade) liability by any means available.

Do not, therefore, expect fairness or sympathy and understanding; the firm will regard you as an enemy and treat you accordingly. You will be told that "our position is clear," which means "we will admit nothing and offer nothing, and if you want one dollar back then sue us if you dare." The question is, should you dare?

Why It Would Indeed Be Daring
The odds are stacked against you, especially if you are dealing with a large firm. You will be stressed throughout the entire case and the firm will be as cool as the proverbial cucumber, because it will turn the case over to its compliance division or lawyers, who are familiar with all the tricks of the trade, have available resources of all kinds, and who know that the opposite applies to you.

Such cases are often complex, invariably very time-consuming, and truly draining on all of one's resources; financial, mental, and physical.

The other side can and will run up massive legal fees, and if you back out partway you will owe them a frightening amount of money. The fees accruing on the other side are the real problem; they are used as a strategic weapon. The theory is that judges are infallible and if you lose, you were in the wrong, deserve no damages, and should, therefore, pay the costs of the other side.

Brokers are not typically held to fiduciary duty in the way that financial advisers are. Registered investment advisers are held to fiduciary duty while brokers are typically held to the suitability standard.
It is also common for the other side to try and avoid the real issues and merits of the case from ever being discussed openly and fairly. Thus, the civil process itself gets misused bureaucratically, through various administrative tricks and processes, while the actual financial mismanagement is either not dealt with at all or simply denied validity.

Furthermore, the less of a case the firm has, the more they will resort to such tactics. The other side will probably believe it has a better chance of escaping liability by mismanaging your complaint and manipulating (or taking its chances with) the civil system than dealing with you fairly out of court, especially if you are in the right.  

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In addition, you can still lose in court because the judge gets it wrong or the broker hires legal and financial "experts" who manage to convince them (often incorrectly) that the merits of the case are weak. There are a lot of financial people out there who will testify to anything for a not-so-modest fee. Justice is definitely not always done, hence the saying "on the high seas and in court, you are in God's hands."

The ugly reality is that investors generally lose money because the investment was too risky, but trying to get damages out of the broker or firm is also fraught with financial and other risks. This all sounds daunting and rightly so. The emphasis must be made that you can still win, but you need to be aware of the harsh realities. Litigation, just like investments, can be mis-sold.

On the Other Hand…
If you are not dealing with a big firm, there is a far more level playing field and you have a much better chance. Likewise, if you have legal insurance that will cover most of the cost, you can proceed more easily.