A brokerage firm or broker can be held liable if that firm or broker misrepresents material facts or omits to disclose material facts to the investor regarding an investment, and that client subsequently loses money on that investment.
Often the misrepresentations or omissions disguise the risk associated with a particular investment. A broker has a duty to fairly disclose all of the risks associated with an investment.
When it comes to a financial advisor, that person should be a trusted, transparent and reliable source of recommendations and advice. It is the duty of the advisor to provide their clients with recommendations that are suitable and treat their clients with fairness.
However, there are brokerage firms out there that will abuse their position with the goal of bolstering their own profits, all at the expense of investors. It is critical to be able to identify this type of behavior and assess if you are at risk or have been a victim of broker misconduct.Why Should SSEK Law Firm Represent Me in a Stockbroker Misconduct Case?
SSEK Law firm represents clients throughout the U.S, as well as Puerto Rico and can help you recover any losses you may have incurred from dishonest or irresponsible brokers and brokerage firms.
When you find yourself in a situation in which a broker or brokerage firm has wronged you, you need to know all of your legal options and partner with a firm that you can trust. SSEK Law Firm has been representing clients in stockbroker misconduct cases for nearly 30 years. Our skilled team of attorneys has 100 years of combined experience.Our Broker Misconduct Practice Areas Margin Account Abuse
A “margin account” is a brokerage account in which the brokerage firm loans money to the investor. For example, if $100,000 is deposited into a “cash” account it can be used to buy $100,000 worth of stock. Purchasing securities in this way is known as “buying on margin.” While investing in this way can increase an investor’s purchasing power, it also increases the risk of loss.
For many investors, trading in this way is far too risky and unsuitable. Any broker-dealer or financial advisor that encourages an inexperienced investor to use a margin account where it is not suitable or appropriate is committing broker misconduct fraud.Churning
Churning occurs when a broker engages in excessive trading in an account. A broker churns an account in an attempt to generate commissions. Many times he will sell the winners to show a small profit and keep the losers.Negligence
Brokerage firms and their advisors have an obligation to carry out a duty of care when giving investment advice and managing the account of a customer. Investors may bring a negligence claim against a broker in the case where investment losses occurred under the supervision of a financial advisor.
A broker may be found guilty of negligence in a situation where they did not commit willful misconduct (i.e. broker fraud) but failed to take action or refrained from taking action to protect an investor against the risk of harm.Overconcentration
One of the most important rules of investing is diversification. If a broker concentrates your portfolio on any individual investment or type of investment, then the risk of losses with that portfolio is dramatically increased.
A broker can be found guilty of practicing overconcentration when he recommends a particular product to clients in large quantities. This most commonly happens with private placements products such as Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs).Registration Violations
All brokerage firms that sell registered securities must be registered by the State and through the Financial Industry Regulatory Authority (FINRA). If a broker or brokerage firm is found to be selling investments without the correct registration or licensing requirements, an investor is entitled to file a registration violations claim against that firm or individual.Unsuitability
In making an investment recommendation to a client, a broker must make recommendations that are consistent with the customer’s risk tolerance, needs and investment objectives. Failure to do this can result in losses for investors especially in cases where the investor was not experienced enough to invest in such a recommendation.
As brokers are upheld to carry out a duty of care when advising customers, those found recommending unsuitable investment recommendations to their customers are committing broker misconduct and fraud.Unauthorized Trading
Prior to placing an order to buy or sell securities for an investor, a broker or advisor must obtain the express permission of that investor. If not, the transaction is unauthorized. If you believe that you have fallen victim to a broker carrying out unauthorized trading on your behalf, you have grounds to file a misconduct case.Failure To Execute Trades
There is little incentive for a broker not to place an order. However, millions of transactions occur each day and mistakes are made, including failures to place orders. To understand how you can fall victim to this form of stockbroker misconduct, read these failure to execute trades & orders situations.Failure To Supervise
Each brokerage firm must “design and implement written procedures” in order to properly and effectively supervise the activities of each of its brokers and other employees. When a broker has been found to be carrying out unsuitable actions or recommendations in an investor’s account, a failure to supervision claim can be made against the particular financial advisory firm.Breach of Fiduciary Duty
A ‘fiduciary” is defined in law as one who has the legal duty to act in the best interest of another. When an investor enters into an agreement to allow a broker to execute trades on their behalf, the broker and brokerage firm must comply with a fiduciary duty to not put their interests before the customers.
In cases where a broker or brokerage firm makes a recommendation in order to better their own standing rather than respecting the investors’ interests, they are committing misconduct.Breach of Contract
When promises are made and consideration paid (or if the person promised reasonably relies on the promise and takes action) a contract is formed. These contracts may be made in writing or through a verbal agreement.
When one of the parties involved in the contract goes against the agreed-upon terms, they are found in breach of that contract. If an investor is led to believe that their account will be handled with the utmost care and the broker fails to provide this, the broker is therefore in breach of contract with their customer.Misrepresentations and Omissions
A brokerage firm or broker can be held liable for broker misconduct if that firm or broker misrepresents material facts or omits to disclose material factors to the investor regarding an investment, and that client subsequently loses money on that investment.
Misrepresentations and omissions are commonly used by financial advisors to disguise risks associated with certain investment products.
Get in touch with SSEK Law Firm today if you believe that you have fallen victim to any of the broker misconduct areas that we have mentioned above. Our stockbroker fraud attorneys have helped many investors across the United States to recoup losses they incurred through the actions of their financial advisors.