Merrill, Morgan Stanley, Prudential, Salomon
Targets of Most Investor and Regulatory Actions in 2001-2002
US Bancorp Has Worst Record of Investor Abuse; Fidelity Has Best Record

PALM BEACH GARDENS, Fla., June 26, 2003 - During one of Wall Street's most scandal- and loss-plagued periods in history, Merrill Lynch, Morgan Stanley, Prudential Securities, and Salomon Smith Barney were the targets of the largest number of legal actions among the nation's 18 most prominent retail brokerage firms, according to an analysis by Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

Reviewing the number of arbitration, regulatory and other legal actions initiated against the firms in 2001-2002 and filed by the first quarter of 2003, Weiss found that Merrill Lynch and Morgan Stanley were targets of 120 and 107 actions, respectively, while Prudential Securities and Salomon Smith Barney were targets of 59 actions each.

Excluding firms with fewer than 10 actions in 2000, Morgan Stanley, US Bancorp Piper Jaffray, and Merrill Lynch suffered the largest increases, as the number of actions initiated against them in 2001 rose 49.1 percent, 45.5 percent, and 38.5 percent, respectively, compared to the previous year.

"Looking ahead, now that the regulators have released reams of evidence against the ten major firms that signed the recent global settlement, we can anticipate an even larger number of investor actions," commented Martin D. Weiss, Ph.D., chairman of Weiss Ratings, Inc.

Relative to the size of each firm's retail customer base, Weiss found that US Bancorp Piper Jaffray, Prudential Securities, and Morgan Stanley were the most frequent targets of investor arbitration filings and other actions in the two-year period, with 63.3, 27.5 and 20.2 actions against them per million customer accounts, respectively. Meanwhile, Fidelity, Credit Suisse First Boston, and Edward Jones reported the lowest number of actions per million accounts, with only 1.5, 2.6, and 4.8, respectively.

"Regardless of the outcome in court, firms with the most legal actions against them are clearly doing something wrong from the customer's perspective," Dr. Weiss added. "There is no reason to believe that customers of any particular firm are more prone to frivolous filings."

The table below shows the number of legal actions initiated against the 18 largest retail firms in the two-year period from 2001 to 2002.

Record of Investor Abuse by Top Retail Brokerage Firms

Company Weiss
Safety
Rating1
Legal Actions
Initiated in
2001-20022		 # per Million
Retail Customer
Accounts3
U.S. Bancorp Piper Jaffray, Inc. B 43 63.3
Prudential Securities, Inc. C+ 59 27.5
Morgan Stanley DW Inc. B- 107 20.2
Wachovia Securities, Inc. B 44 14.9
Merrill Lynch Pierce Fenner & Smith C- 120 12.1
Ameritrade4 C 19 11.9
A G Edwards, Inc. A- 39 11.5
Raymond James & Associates, Inc. B+ 11 10.6
UBS Painewebber Inc. C+ 28 9.8
Quick & Reilly, Inc. A- 12 8.9
Salomon Smith Barney, Inc. C 59 8.4
E*Trade Securities LLC B 24 7.3
TD Waterhouse Investor Svcs, Inc. B- 33 7.2
American Express Financial Advisors C+ 13 6.5
Charles Schwab & Co., Inc. B- 47 6.1
Edward D. Jones & Co. LP A- 24 4.8
Credit Suisse First Boston Corp. C- 11 2.6
Fidelity Brokerage Services LLC B+ 17 1.5
Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak

Critical Steps for Investors Filing an Arbitration

Many investors with grievances against their broker find the arbitration process rather daunting. To help them through the process, Weiss recommends the following steps for investors considering legal action against their broker:

1. To decide whether legal counsel is necessary, investors can use the following guidelines as a general rule of thumb:
  • If losses are under $10,000, the arbitration procedure is simplified, therefore it is neither necessary nor cost-effective to hire an attorney.
  • For losses between $10,000 and $100,000, at least an initial consultation with a lawyer would be very helpful.
  • If losses exceed $100,000, legal counsel is highly recommended. To contact an attorney with arbitration experience, investors should contact the Public Investors Arbitration Bar Association (PIABA) at 888-621-7484 or www.piaba.org.
2. In addition to using evidence of bad advice, investors should seek to strengthen their case by showing that the broker failed to follow their investment guidelines, or that there was churning, misrepresentation, or fraudulent omission.
3. Investors should gather the facts and any supporting documentation for their claim up front, including all agreements with the broker, account statements, confirmation slips on trades, and correspondence with the broker or firm.
4. Investors should submit a "Statement of Claim and Demand for Arbitration" to the brokerage firm, via certified mail, return receipt requested. In the wake of the recent scandals and the global settlement, it should be more difficult for the firm to have valid claims dismissed.
5. Investors will have only one chance to request relevant documents, and the firm may object to many of them. Likewise, investors may object to document requests from the firm that place an unreasonable cost and time burden on them.
6. When the case is heard, investors will have the opportunity to present their case in a courtroom-like setting, invite expert witnesses, and make closing arguments. They should stick faithfully to the facts and avoid overstating any suffering.
7. It should take 30 days for the panel to review each case, and another 30 days for any award to be paid. If the award payment is not received on time, investors should send a letter to the case administrator requesting that the NASD revoke the firm's license, with a copy of the letter to their broker via certified mail.

"Despite the many steps and waiting periods, the arbitration process gives investors a reasonable chance at recovering at least some portion of their money," says Dr. Weiss. "The real lesson to be learned, however, is the importance of using independent advice and a solid firm that is rarely the target of investor and regulatory actions."

Weiss Ratings is the only U.S. firm that regularly reviews the commissions, services, legal track record, and financial health of the nation's security brokers, issuing safety ratings on more than 600 full service, discount, and online firms each quarter, representing an estimated 99 percent of the industry's business. Weiss also rates close to 15,000 other financial institutions, including banks, insurers, and HMOs, as well as the risk-adjusted performance of more than 7,000 stocks and 12,000 mutual funds. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses, and libraries.

Consumers needing more information on the financial safety of a specific company or investment can purchase a rating and summary analysis for as little as $7.95 through www.WeissRatings.com, or starting at $15 by calling 800-289-9222.

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1 Weiss Safety Ratings represent an independent opinion of a firm's financial safety, reflecting the firm's capital, earnings, and other factors in addition to its exposure to legal actions.

2 Excludes actions that were initiated in 2001-2002 but have not yet been recorded in the NASD's CRD database.

3 Reflects the average number of customer accounts reported in 2001 and 2002.

4 Data on legal actions reflect JP Securities and Ameritrade, Inc., the primary retail subsidiaries of Ameritrade Holding Corp. The Weiss Safety Rating reflects the data of Ameritrade, Inc.

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