No News is Good News

By Dominique Paul

When there has been activity in your investment account, your brokerage firm is required to send you a letter. The purpose of this letter is to confirm that you approved the activity that took place. The letter is meant to give you a chance to tell your brokerage firm that there is something wrong with the activity.

The letter you receive is called a negative consent or response letter. In the letter, the brokerage firm is telling you to contact them about the activity ONLY IF you did not approve the activity in your account. The brokerage firm would assume that you approved the activity on your account if you did not contact them because they think no news is good news. Not contacting the brokerage firm about unapproved activity could have consequences that are both expensive and unable to be reversed.

Here is an example of what you are supposed to do when you receive the negative response letter.

At dinner, you order coconut shrimp with orange-pineapple dipping sauce. However, your waiter brought you coconut chicken without any dipping sauce. The waiter would expect you to say the order is wrong. If you DID NOT say anything, the waiter would assume your order is correct. If you did not correct the waiter, when your bill arrives, you would have to pay for the wrong order because you did not correct it earlier.

Often, when there is a complaint about unapproved activity, it is a result of the customer not contacting the firm. There a couple of ways this happens. First, the customer did not know what the letter stated because they never opened the letter. Second, the customer opened the letter but only cared whether they made or lost money, never reading the entire letter. Third, the customer read the entire letter, but called their broker instead of the number provided in the letter. The third scenario is a problem because the broker is the person who is doing the activity and the letter is how the brokerage firm tries to make sure the broker is doing things correctly.

The best way to avoid this type of problem is to open and read the letters from the brokerage firm, every time. If there is something you do not understand, or you think is wrong, call the number in the letter. The brokerage firm can explain and help you correct the activity.

Hopefully, you always get what you order. If you do not, always contact the firm and correct it.