Broker Negligence Leading to Investment and Bond Losses

Broker Negligence: Can it Be Grounds for FINRA Arbitration?

Some investors are under the mistaken belief that to seek financial recovery, they must demonstrate that a broker or firm committed securities fraud. This is not always the case. Broker negligence can also be grounds for an arbitration claim to recover damages if losses result.

Negligence by a broker or investment advisor can occur in many ways. It doesn't have to involve intentional misconduct. When a financial advisor and/or financial firm fails to provide a customer with the standard of care they should have received, this is known as broker negligence. This is a breach of fiduciary duty, and investment losses can happen as a result of this.

Even if the broker-dealer did not play a part or know about a broker's negligent actions, the financial or brokerage firm could still be held liable for the investment losses caused by their registered representative.

At Shepherd Smith Edwards and Kantas (SSEK Law Firm at, our experienced broker negligence attorneys and securities lawyers have spent over 30 years pursuing claims against brokerage firms on behalf of investors. Call (866) 931-7628 today or contact us online.

What Are Some Examples of Stockbroker Negligence?

Stockbroker negligence can happen in one of many ways. Below, we've listed the most common ways stockbrokers and financial advisors can be found guilty of negligence resulting in significant financial losses.

  • Unsuitability: Brokers owe their customers both a duty of care and suitability. Yet many financial advisors continue to recommend investments, trades, or strategies that are not an appropriate match for customers' investment goals, investing profiles, or risk tolerance levels. Unsuitability continues to be a leading cause of broker negligence claims.
  • Failure to Conduct Due Diligence: Our investment loss attorneys at SSEK Law Firm once had a large string of cases in which the brokerage firm told the broker that a particular product was safe and conservative. Arguably, the broker should have done his own research. Instead, he took the employer's words at face value and recommended the investment to customers without having a true picture of the risks. Unfortunately, the products in question were not principal-protected, and the investors lost significant sums. The broker's failure to conduct his own due diligence was negligence
  • Failure to Supervise: Our securities law firm had another case in which a financial advisor gave faulty advice about the liquidity of a product that was traded via auction. Although his firm knew better, he believed it was fully liquid and recommended that our client, a business entity, invest seven-figure sums. The market for the product later froze. Besides losing money, this entity also lost its business. The advisor in question was negligent, as was the firm for its failure to supervise. When inadequate supervision enables a broker to engage in negligent or fraudulent actions, the broker-dealer can be held liable for losses.
  • Overconcentration: While it is easy to assume that overconcentration by a stockbroker is always done with fraudulent intent, broker negligence can also be a factor in failing to diversify a customer's account. This may be as simple as forgetting to review an investor's portfolio to ensure market movement has not caused overconcentration in too much of one kind of investment or sector because losses may happen should that investment or sector suffer steep declines.
  • Misrepresentations and Omissions: Even when done unintentionally, leaving out key information about an investment or misrepresenting material facts or risks can cause customers to agree to a transaction or strategy they wouldn't have otherwise. An investor who was told that the investment they were buying was safe and low risk can end up blindsided upon discovering that the product was, in fact, highly volatile, and they've now lost money.
  • Failure to Execute Trades: Not placing a customer's requested order, whether a sale, liquidation, or purchase, can lead to losses. For example, failing to execute a sale for a customer may cause them to lose money if a price drop happens later. Grounds for a negligence claim may be brought to recover damages.
  • Breach of Fiduciary Duty: From the beginning, when a broker agrees to manage and execute orders in a customer's account, he/she always agrees to make decisions that will benefit the customer. If they fail to act in the client's best interest, this is considered a breach of fiduciary duty.
  • Registration Violations: Many of our securities attorneys and FINRA lawyers have dealt with clients that have worked with financial advisors or stockbrokers that breached registration violations. To sell investments and registered securities, brokers and brokerage firms must be registered to do so. It is not uncommon for particular individuals to operate without the required licenses; when this occurs, that individual breaches registration violations.
Fighting for Investors Harmed by Broker Negligence

Anyone can make a mistake. However, when fiduciary negligence by a broker or firm causes a customer to lose money, that investor should be reimbursed for their losses.

Over the years, SSEK Law Firm has recovered many millions of dollars on behalf of the investors who have come to us for help. Our knowledgeable team of securities lawyers, consultants, and others has over a century's worth of collective experience in securities law and the securities industry.

We have represented thousands in Financial Industry Regulatory Authority (FINRA) arbitration, private arbitration, mediation, and litigation. Over 90% of our cases have resulted in total or partial financial and investor recovery.

SSEK Law Firm has securities law firms all over the US. Schedule your free, no-obligation case consultation with one of our veteran broker negligence attorneys by calling (866) 931-7628 today.

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