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Location: Las Vegas, NV
Promptly on Monday after much useful advice I got a hold of an estate lawyer. He said this is the first time he's seen a case anything like this. He gave me a free 15 minute consultation over the phone to prepare for an hour free in person consultation. At the in person consultation he was incredibly prepared. He had dug up a version of the transfer on death contract the brokerage has and discovered that, according to the contract, the broker is responsible for closing all leveraged and margin-ed positions immediately upon notification of death. The document also outlines that the broker is not responsible until receiving said notification of death, so my lawyer interprets that document as they are responsible after his death. He thinks we can easily argue for breach of contract and breach of fiduciary duty to both my father's estate and to me being the heir of the transfer on death account.
I had notified the broker of death first by phone and followed up immediately with a scanned copy of the death certificate. I then sent a physical death certificate via certified mail. It took five days for the physical copy to get there. The day they signed for the letter they turned the account over to me.
My lawyer suggested that I hire a forensic accountant and I took his recommendation on hiring one. The accountant did some digging and it turns out that the account is worth even more than I had imagined. When my brokerage was first notified of death via email and phone call the account's value was actually around $125k. From the time it's value was $125k to when I had initial control over the account it dropped in value to $50k.
According to her my dad had rare increased special margin privileges called "portfolio margin." She says that it's margin that you need at least $125k to have and it is based on the riskiness of your whole portfolio. According to her this special margin provisioning allowed my dad to have around 6x leverage. Her investigation shows that the account just got a portfolio margin call to increase it's equity to that minimum amount at the same time the broker was notified of death. The broker gave two days to meet the margin call. When that wasn't met, according to the accountant, the account became a "Regulation T" account which only allowed 2x leverage. So, they started liquidating the account to meet "Regulation T" margin requirements. The forensic accountant said that my dad was following a "long-short" strategy in "correlated securities." I'm not quite sure what it means but it sounds like he bets on one stock going up, and one stock going down, and by doing it in equal amounts he is protected from general market moves. According to her the brokerage sold some call options he owned on AMD but left the call options he sold on NVidia. Had they not taken action then even though the NVidia trade had gone bad on June 8th, his calls on AMD would have canceled out the losses.
The possible securities violations the broker may have committed is outside the knowledge of my lawyer. He wants to bring on a securities lawyer to handle this. He thinks that absolutely there is a 99% chance that he can get me the 50k value when the broker officially received the death certificate. He thinks there is a 80% chance that he can get me the account's value on the day I called and emailed. He says they may argue that someone could always use identify theft so it may not be proper notification. In my specific case I had my dad's cell phone on me and turned on in case anyone called him so I could let them know the news. The broker never made any calls to him to verify the death notification so he thinks it's strong evidence that they didn't believe anyone was attempting identity theft.
We still have some work to do. The two big things are getting the actual copy of the transfer on death paperwork my dad filled out as it may not have those provisions. Then in taking over the account it may be possible (although I don't remember), that I've agreed to an arbitration clause, which may hamper things. He thinks I may have a huge pay day ahead of me on the securities regulation side too. The last thing, which we really need specialized help on, is that my dad also owned significant stock (not call options) betting the stock Rite-Aid would go up. Apparently there is a merger happening soon with Walgreens and it could increase a lot in value. One part of our strategy is to determine if we should argue for the cash value of the account the date of notification or for the underlying shares had the agreement (if there was one) was upheld liquidating leveraged and margin-ed investments. There is then the question on waiting until after the news of the merger occurs before making any formal demands.
I have a few pressing questions. I'm on a really tight budget and I can't afford a lawyer. My lawyer is really flexible and he is giving me these two options:
1. Working on a contingency basis. His offer is a 33% cut of all money I receive past the initial $50,000 he thinks he can get no problem. Essentially he is doing the first 50,000 pro-bono. So, if I get paid $75,000, then his take is (75,000-50,000) * .33 = $8,250. From this agreement he will come to a contingency split with the securities lawyer and pay for all court fees, the security's lawyer fees, any additional forensic accountant fees, an oral litigator if it goes to the court house, mock jury trials, etc.
2. I pay hourly rate and all the fees/costs incurred. His hourly rate is $350/hr and the securities lawyer he recommends is $500/hr. He is thinking it may take up to $25,000 pre-trial and maybe another $25k if it goes to trial. He thinks he could get a $300k-$500k settlement. With this its a higher risk/reward.
Which rate should I go for? I'm thinking the contingency basis to remove my financial risk, and I feel that it is a really nice and fair deal that he is throwing the first $50k in for free. If we manage to just get the $125k first notification of death value it works out to be the same as the hourly rate. How does the lawyer sound to you? Does it sound like I'm in good hands? Also, how screwed am I if I did sign an arbitration clause with the brokerage?
Submitted June 23, 2017 at 01:37AM by inheriteddebt http://ift.tt/2rXl0hX
