Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, June 21, 1993 TAG: 9306220368
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Long
My son-in-law invested $1,500 and asked if I wanted to invest some money. I gave the broker $500 which he put in Aricana Resources.
I have never received anything from this investment. As you can see from the enclosed statement, the stock is marked "not priced" and no figure is listed for income from the account.
Is there anything I can do to get compensation for this investment?
A: Records at the Roanoke office of Scott & Stringfellow show that you purchased Aricana Resources in March 1986.
This was a so-called "penny stock" - inexpensive and usually highly speculative. You paid 97 cents a share plus a commission of $35, according to the records. So your $505 investment purchased 500 shares.
The stock traded on the Vancouver Exchange in Canada. The Vancouver Exchange specializes in new ventures and small companies, many of which could not qualify to be traded on an exchange in the United States. Many of them are also considered speculative investments.
Aricana last traded on Dec. 31, 1987, at 9 cents a share. Then it seems to have gone out of business. The broker who sold you the stock has long since left the company.
Bill Nash, manager of Scott & Stringfellow's Roanoke office, said his company never recommended that particular stock. The broker, of course, might have recommended Aricana on his own. Nash couldn't find a record that the broker had sold other shares of Aricana, or that other brokers there sold it.
You are not in a good position to contest what happened.
One reason is the passage of time. Most transactions can be questioned for about five years, and seven years have now passed since you bought the shares. You should have inquired about your investment before now.
Arbitration is the usual means of settling disputes between brokers and clients. That's cheaper and faster than a court suit, but the small amount involved would not justify your trouble.
Besides, most such cases involve charges of churning - that is, trading too often in order to generate extra commissions and fees, or trading without the stock owner's consent. Your broker did neither.
A broker's recommendation, even if this was the broker's idea and not your son-in-law's, is no guarantee that the investment will pay off. Clients know that they are taking a chance when they invest, especially in speculative issues. They hope the stock will go up, but they are prepared for it to go down. You cannot collect merely because you lost that gamble.
If you still want to present your case, you can do it in writing. Your letter should cover all the facts. It should be sent to the Office of Consumer Affairs, Securities and Exchange Commission, 450 Fifth St., N.W., Mail Stop 2-6, Washington, D.C. 20549. The office can compel the broker to respond and advise you about arbitration.
You also can complain to the Securities Division, State Corporation Commission, P.O. Box 1197, Richmond 23209.
People who invest in an unfamiliar stock should ask for a research report on the company. This is especially true for investors who buy few stocks or are unfamiliar with the degree of risk.
Annuity? Check the rating
Q: Please advise me as to the rating of Life USA Insurance Co.
Charter Federal Savings Bank is offering its tax-deferred annuity, which is paying a 5.25 percent rate with a yearly bonus of 8 percent.
I would also like to know the status of Fidelity Bankers Life Insurance Co., whose policies were transferred to Hartford Life, with whom I already have a tax-deferred annuity.
A: Charter Federal Savings Bank has, in the past, been listed as sound enough to pay its obligations, although some of its statistics lagged the industry. Ratings change constantly, however, and the way to check on an insurance company is to ask the company for its ratings by Standard & Poor's, Moody's or Duff & Phelps. Do not accept anything less than an "A" rating.
The annuities of Fidelity Bankers Life Insurance Co., which went out of business, were transferred last Tuesday to Hartford, a sound company. That means they are no longer frozen.
Fidelity policyholders who accepted the state's rehabilitation plan will be paid the full value of their annuities at retirement. They can also get their money out on the existing terms. Their only loss is that they did not get the inflated interest promised by Fidelity before its failure.
Those who refused the plan got 85 percent of their money. The other 15 percent still is frozen in what the state has left of Fidelity.
You seem to have a lot of annuities. Your portfolio should also contain some investments with growth potential. The value of annuity benefits will be eroded by inflation.
Correction
An error was contained in a letter from a reader in last week's column. He said his participation in a 401(k) plan would reduce his Social Security benefits. Several readers pointed out this is not true; plan contributions do earn Social Security credits - all the more reason to invest in a 401(k) plan.
Mag Poff will help find answers to your personal finance questions. Send them to her at the Roanoke Times & World-News, P.O. Box 2491, Roanoke 24010.
Memo: ***CORRECTION***