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Market Downturn Triggers Wave of Lawsuits

When Jacob Froess' certificate of deposit from AmTrust Bank matured, he went to a Florida branch of the Cleveland-based retail bank in October 2007 to put $70,000 into another CD. But a teller suggested the 56-year-old auto mechanic in Plantation speak instead with a financial adviser from the brokerage AmTrust Investment Services Inc. The adviser allegedly said rates on CDs were low and that if Froess bought shares in a Mutual Series Mutual Discovery fund, he would make more money.

Froess soon agreed to pay $3,157 in upfront fees to invest his $70,000 in the stock mutual fund, and the adviser allegedly falsified Froess' risk profile in his brokerage account application to make it look like he qualified to assume the associated risk.

She filled in the form with details, saying he was retired rather than unemployed, had an income of at least $25,000 and made an unsolicited order for the fund. Froess' investment lost value, and he sold it on July 30 at a loss of $11,745. He filed a claim Oct. 17 with securities-firm watchdog the Financial Industry Regulatory Authority, or Finra, blaming AmTrust for steering him away from his original plan to buy a safer investment.

"We're not able to respond because we haven't yet received the detail on the case," said Donna Winfield, a spokeswoman for AmTrust. "We don't comment on specific customer inquiries based on privacy issues."

Froess isn't the only one who's upset these days about the financial advice he received before U.S. equity benchmarks plunged more than 40 percent this year.
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