I guess I’ve been out of the stock brokerage business for far too long (I started my broker “recovery” in 1986). Until I read about them in Jason Zweig’s "Wall Street Journal" column, I had never heard of happiness letters.
These notes are not something you should be happy to receive because the also go by another name “CYA (cover your a**) letters.” They are sent to clients when a firm discovers that a broker may have been doing some things they shouldn’t be doing in a client's account, like trading too much or purchasing overly risky securities.
They are wording in a stealthy, dull, jargon-laden manner that leads most just to toss them in the trash. Don’t! That’s exactly what they want you to do. If you toss the letter and later end up in arbitration over the matter, the firm’s attorney will argue that you were aware of the issue and chose to nothing about it. That's because these letters often end with a statement like this “unless you instruct us differently we will assume that you are comfortable with…" whatever the scurrilous activity might have been.
The moral: Read everything sent by your broker. If you get a letter that about something that sounds suspicious consider spending a little money to talk with a securities attorney (or at least your accountant or another investment advisor).
Read the Wall Street Journal article (subscription may be required)