Broker acted properly by selling stock in two transactions

Published Oct. 29, 1990|Updated Oct. 18, 2005

Q. I asked a broker to sell 40 shares of a preferred stock at "94" _ $94 a share. Instead of selling all 40 shares at once, he sold 20 shares at 94 the day I gave him the order and 20 shares at 94 a couple of days later. He said he did it that way because there is a narrow market in this stock. This means he gets two commissions instead of one. And the commission for selling 20 shares at 94 is the same as the commission for selling 40 shares at 94. As a result, my commission costs are twice what they should have been.

After having owned that stock for 20 years, I probably know more about it than the broker does. If I decide to make a complaint about this costly error, who can I turn to?

A. Turn away and forget it. You have no good reason to complain. During the years you owned it, one of the things you should have learned about that stock is that it trades in 10-share "round lots." Most stocks trade in 100-share round lots, but inactive preferred stocks for which there is a narrow market _ meaning they are bought and sold relatively infrequently _ trade in 10-share round lots.

Your brokerage firm sold 20 shares for you when a sale of two 10-share round lots could be executed at 94 and made a similar sale later on when that became possible.

If you wanted all 40 shares sold in one transaction, you should have specified that you were placing an "all-or-none order." It was your responsibility to do so, although the broker could have explained things to you.

An all-or-none order, however, can create problems. When all shares can't be sold or bought in one transaction at the price specified, the order won't be executed.

Q. Different stock brokerage firms seem to charge different commissions. Aren't commission charges regulated?

A. Commissions were fixed by the New York Stock Exchange, with other exchanges following the Big Board's lead, until May 1, 1975. Effective that date, the Securities and Exchange Commission put an end to that cozy arrangement. Now, each brokerage posts its own commission schedule.

William Doyle welcomes written questions, but will be able to give answers only through the column. Address questions to William Doyle, King Features Syndicate, 235 E 45th St., New York, N.Y. 10017.