ON TOP OF the stress of exams and a bar review course this spring, 28-year-old Daniel Sweeney was under another kind of pressure.
Sweeney, then a Duquesne University law student, and a handful of colleagues represented investors in real-life securities cases as part of a network of law-school programs. The students work with investors seeking claims against brokers in cases that aren't large enough to attract attention from established lawyers.
"With these cases there is a sense of urgency to do the best you can," Sweeney said. "There's added pressure because for a lot of these people the losses represent all they have and they're depending on you."
In the years since the stock bubble burst and myriad revelations surfaced about Wall Street conflicts of interest, investors are becoming more aggressive about accusing their brokers of engaging in unauthorized trading or making unrealistic promises.
Investor complaints set a record in 2003 and continued at high levels last year, despite positive years for the markets.
Securities firms typically require new investors to sign forms agreeing to handle disputes through arbitration rather than the traditional court system.
Already, 11 investor clinics are in operation on law school campuses in New York, Pennsylvania, Illinois and California. Investors from all states are welcome to call the centers with potential arbitration complaints.
The newest program, called the Investor Protection Center at Northwestern University, won a $120,000 grant last year from the education arm of the National Association of Securities Dealers to represent small investors and develop a model for more clinics nationwide.
"These types of cases offer our students the same complex issues [as other securities law cases], just not with as many zeros," said J. Samuel Tenenbaum, an assistant law professor at Northwestern and director of the Chicago center.
Under the direction of Tenenbaum and other Northwestern faculty - including former Securities and Exchange Commission Chairman David Ruder - law students at the start-up clinic have combed through about 30 potential cases this year and are investigating four of them, Tenenbaum said. Generally, clients must make less than $100,000 a year in income and have a claim of less than $100,000 to be eligible for help by the center.
Older centers around the country report they each handle 100 to 150 investor inquiries annually and pursue up to 20 cases to arbitration or settlement. Most of those cases have resulted in an award to the client, though recoveries usually don't cover the total loss.
Sweeney, now a law firm associate in Pittsburgh, said the student experience has him considering a career in securities law.
It has also focused his thinking about his own investments. Realizing even successful investors in an arbitration case often recover only a fraction of their losses was a sobering lesson, he said. Sweeney's adviser, Duquesne professor Alice Stewart, has seen some painful cases.
One 65-year-old client and her 85-year-old mother had given a broker discretion over their entire portfolio, she said. The broker proceeded to aggressively trade the account, buying options and trading on margin, behavior that Stewart said was clearly inappropriate for elderly and unsophisticated investors. Stewart believed it was an egregious case and one that would surely result in a good recovery for the clients, who lost a sizable portion of their portfolio.
"But the daughter had a brain tumor and had a difficult time keeping up [with the legal preparation for the case] and she decided to withdraw the complaint. That's one case I still haven't let go of," Stewart said.
E-mail Janet Kidd Stewart at email@example.com.