Law professor spearheads new Advocacy Law Clinic

Clinic will help those who lost money due to advisor misconduct

By Sheila Pursglove

Legal News

Misrepresentation, unsuitability, unauthorized trading, excessive trading ("churning"), and failure to supervise - all issues that make investors nervous in these days of a rollercoaster Dow, vanishing pension funds, Ponzi schemes, and other financial shenanigans.

Ultra-wealthy investors can always afford to hire an attorney or find someone to take a big case on a contingency fee. But "little guys" aren't usually so lucky.

MSU College of Law may be able to help--with the launch this fall of the Investor Advocacy Clinic, spearheaded by professor Ben Edwards and made possible by a grant from the FINRA Investor Education Foundation.

"We're hoping to provide public education about informed investing and help smaller investors who can't otherwise find an attorney," Edwards explains. "We may be able to help some individual investors recover losses."

Investors cannot sue their broker or financial advisor simply because they lost money.

"Many times, investors lose money when the market goes down or because the risks their broker warned them about occur," Edwards notes.

But sometimes investors lose money because someone convinced them to take more risk than they wanted. This can happen if an adviser misrepresents the risks associated with a particular investment to collect a commission. In these cases, the clinic may be able to help.

"Most people are surprised to discover that they can sometimes bring a claim against a stockbroker or financial adviser after suffering investment losses," Edwards says. "Whether the investor has a claim will depend on the circumstances and the complicated law that applies."

Edwards and his law students will help individual investors who've lost money because of a financial professional's bad advice or other misconduct.

"When individual investors go up against stockbrokers and investment advisers, they will usually find financial professionals are represented by some of the best lawyers in town," he says. "With the Investor Advocacy Clinic, we may be able to help even the playing field to some degree and provide individual investors with legal counsel. We're hoping that attorneys that have clients with a problem in this area will send clients our way for claims that are too small for them to handle."

The clinic will launch with an initial group of seven students who will learn about investigating new cases, preparing cases for arbitration and negotiating with opposing counsel.

Edwards brings plenty of financial expertise to his new role - having earned his chops in the rough-and-tumble world of New York City finance as an Associate with Skadden, Arps, Slate, Meagher & Flom LLP.

Practicing in the firm's securities litigation group and litigating cases arising out of the Bernard L. Madoff scandal--the largest Ponzi scheme of all time--Edwards' work included actions in federal trial and appellate courts.

"Depending on how you count their losses, investors in the Madoff Ponzi scheme lost between 16 and 50 billion dollars by the time his fraud came to light," he says. "Madoff defrauded thousands of different people out of millions and billions of dollars.

"When he went to jail for his fraud, many people who lost money to him started suing everyone who had any involvement with Madoff. Much of the ongoing Madoff litigation revolves around who knew what and when and whether they should have figured out that the former chairman of the National Association of Securities Dealers--which later became NASDAQ--was running history's biggest financial fraud."

Published: Thu, Jun 27, 2013