Stockbroker FAQs

Initial Steps to Determine Broker Negligence

If fiduciary negligence by a broker or firm caused losses to an investor the broker or firm should reimburse the investor for those losses. However, you must first determine if you have fallen victim to negligence.

There are a few steps to take when trying to assess if you have been a victim of broker negligence:

1. The first step in determining broker negligence is to assess if the broker’s conduct was below the appropriate level of care, meaning that the broker acted like a reasonable financial professional would in the same circumstance. Negligence does not have to be intentional, but can just be the result of not living up to the standard of care of a reasonable financial advisor, even if there were good intentions.
2. If you have determined that you have in fact suffered financial losses due to broker negligence, it is possible that you may be able to hold the brokerage firm liable for those losses. These cases are normally handled in the arbitration process before the Financial Industry Regulatory Authority, or FINRA.
3. Consult with a securities lawyer to determine if you have a broker negligence claim and attain appropriate representation.

A CRD stands Central Registration Depository, which is a database that contains information on brokers and brokerage firms. Every stockbroker that is licensed to sell securities in the United States has a CRD number.

Every broker and brokerage firm is required to disclose specific information throughout the entire licensing and registration process. A CRD report may not be totally inclusive, however it can provide valuable information including details on the following:

• Registration
• Licensing
• Background
• History
• Complaints

Why is It Beneficial to Have a Broker’s CRD Number?

It is crucial as an investor to do the appropriate amount of research before placing your savings with an investment professional. Taking the time to do a little bit of additional research can potentially go a very long way toward decreasing the likelihood of investment fraud.

It is important to find out if a broker or brokerage firm is actually registered and if they have a history of complaints, financial difficulties, etc. Looking up their CRD number is one of the best methods to do this.

How to Find a Broker’s CRD Number with FINRA’s BrokerCheck

• Navigate to FINRA’s BrokerCheck website
• Enter in the broker or brokerage firm name, followed by the location.
• The CRD number will be listed under the broker’s name or brokerage firm.
• You’re done! You can review qualifications, employment history, potential complaints and more.

Stockbroker Fraud Involves a Range of Misconduct

Stockbroker fraud is an overarching term that encompasses a wide range of misconduct on the part of a brokerage firm or individual broker. This may entail tactics such as unauthorized trading, misrepresentation, pressuring sales tactics and more.

There are a few common types of stockbroker fraud:

• Omissions or misrepresentation: this occurs when a brokerage firm or broker misrepresents facts or does not disclose facts to an investor, and that client ultimately loses money. This may be considered a breach of fiduciary duty and victims may be able to recover losses.
• Churning: this occurs when a broker participates in excessive trading for the purpose of generating excess commissions, rather than investing in the best interests of the client.
• Unsuitability: this occurs when an investment professional recommends an investment or strategy that is not appropriate for the customer based on the investment objectives, risk tolerance and other relevant factors. This can occur when a client does not have the financial ability to take on the risk that may be associated with an investment or strategy, and if that investment does not match those financial needs or if the client is unaware of the risks associated with certain investments.
• Breach of fiduciary duty: this occurs in a number of different circumstances, but generally revolves around when a financial professional puts their interests ahead of the interests of their client and otherwise does not do what is best for the client..
• Unauthorized trading claims: this occurs when a broker makes transactions without explicit permission. Churning is often involved with this, where a broker is involved with an excessive amount of trading and does not obtain authority for the trades.

What to Show to Prove Broker Misrepresentation

There are a few things that are necessary to show in order to actively pursue a securities fraud claim against a stockbroker.

1. Proof that money has been lost due to omission or misrepresentation by a broker or brokerage firm.
2. The broker or brokerage firm actively misrepresented the security investment or omitted certain information about that investment.
3. You trusted and relied upon the counsel and advice of your broker or brokerage firm.

It is crucial to have a carefully prepared case when it comes to cases like this, as many brokerage firms have experience in FINRA arbitration and use very experienced counsel.

If you would like to learn more about FINRA, errors and omissions cases or have other questions related to stockbroker fraud, contact SSEK online or call us today. We have represented many victims of securities fraud losses for over twenty years and have helped clients recover millions of dollars in losses.