March 16, 2004
I have had a brokerage account for more than decade with what originally was Dean-Witter-Reynolds, Inc and is now Morgan-Stanley. I have had the same broker during these years. I have the following issues with regards to mutual funds.
1. In the past, I repeatedly asked my broker why I was not able to invest in Janus, Vanguard, or Fidelity mutual funds through my broker- Morgan Stanley.The answer I received was that the best of Morgan Stanleys mutual funds were as good or better than the best of Janus, Vanguard, or Fidelity funds. I was never informed that my broker might have any financial advantage in selling me Morgan-Stanley, MFS, or Franklin Fund mutual funds.
2. I incurred heavy losses during the 2000-2002 market down-turn without any profit warnings from Morgan-Stanley.
3. Morgan-Stanley asked me to sign an agreement not to file any law-suits against them in connection with my brokerage account, but instead to submit any grievances to arbitration.
In my opinion:
1. Brokerages should be required to disclose any financial advantage they gain from promoting their own funds versus other mutual funds.
2. In general, brokerages whose clients have large accounts and who depend on their brokers to warn them of potential and actual market losses should be required to issue warnings to their clients just as corporations issue profit warnings.
3.The legal issues connected with coercing clients to agree to arbitration in lieu of their legal right to sue needs to be reviewed by the SEC.