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High Net Worth and Ultra High Net Worth Investors Claims


A high net worth (“HNW”) investor is traditionally defined as having investable assets of over $1 million, not including collectibles and residences. There are an estimated 10.1 million HNW investors worldwide. An ultra high net worth (Ultra-HNW) investor is defined as having at least $30 million in investable assets. There are approximately 95,000 Ultra-HNW investors worldwide. HNW and Ultra-HNW investors hold a significant portion of their wealth in the stock markets.

Many of the claims brought by Klayman & Toskes involve HNW and Ultra-HNW investors who lost money in low cost basis, company stock received and/or purchased through their employers. For instance, many investors lost money in large, concentrated positions that they received either through employee stock option plans or employee stock purchase plans. Further, many insiders and founders of public companies have lost money in concentrated, restricted stock positions, often obtained during an initial public offering, that were subject to lock-up agreements and/or Rule 144 restrictions. In these types of cases, the investors’ brokerage firm, financial institution or investment bankers failed to protect the large, concentrated stock positions through the use of risk management strategies and/or diversify away the risks associated with concentration. As a result, these investors sustained substantial losses.

Klayman & Toskes also represents HNW and Ultra-HNW investors who lost money in investment products that were only sold to accredited investors and qualified purchasers. However, in many cases, the risks associated with products sold to accredited investors and qualified purchasers were misrepresented, which ultimately led to significant investment losses.

The securities claims filed by Klayman & Toskes against full-service brokerage firms on behalf of its HNW and Ultra-HNW clientele include the following issues:

  • Failure to protect Rule 144, Restricted Stock positions
  • Failure to protect Low Cost Basis stock
  • Unsuitable recommendations regarding Employee Stock Options
  • Over-concentration in a single security or sector
  • Hedge Funds
  • Private Equity Investments
  • Alternative Investments
  • Misallocation of assets
  • Margin Abuse

When HNW or Ultra-HNW investors receive notice of a securities class action that has been filed against a brokerage firm where they conducted business, and which involves a particular security they purchased, Klayman & Toskes “opts-out” these investors out of the class action and files individual securities arbitration claims on their behalf.

HNW and Ultra-HNW investors should be aware of the benefits of filing an individual arbitration claim, as opposed to participating in a class action lawsuit. By participating in a class action lawsuit, an investor will most likely recover only pennies on the dollar. However, if one has experienced significant investment losses, it may be more beneficial for them to file an individual securities arbitration claim. In 2003, Klayman & Toskes conducted a detailed study of securities arbitration versus class action. The study concluded that investors who file a securities arbitration claim traditionally obtain an overall higher rate of recovery as opposed to participating in a class action lawsuit.

To view the full results of the comparison, click here.