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Many people invest in securities like stocks, bonds and mutual funds, some for years and often decades, saving for retirement, children’s education, family support, wealth accumulation, to create a sense of financial security or to leave behind a legacy. Whatever their reason to save, most investors seek the guidance of a financial advisor, whose very role is to both advise and manage a clients’ investments in order to ensure that they are getting a good return on their money.

Sadly though, investors will lose tens of billions of dollars not always due to market forces, but due to unethical and negligent financial professionals who abuse the trust and confidence of clients.  We’ve seen this a lot lately with the Coronavirus pandemic.  Some financial advisers make money based on you staying in the market. If you were to have sold all of your stock, they’d lose their commissions.

As a result we’ve seen some brokers who told their clients to stay in the markets when they knew or should have known the market was about to tank.  As a result, many people have lost their nest egg.  If you can prove your broker was negligent they may have to reimburse you for your losses.  It’s like suing a doctor or someone else for malpractice in many ways.

There are a variety of financial laws and obligations in place for stockbrokers, broker dealers and investment companies along with both federal securities laws and state securities law to regulate the duties that apply to the financial industry and the standards that the industry must meet.

Unfortunately, wrongful conduct within the industry still occurs every day. In 2018 alone, according to FINRA (Financial Industry Regulatory Authority), brokerage firms and financial professionals were fined more than $61 million and ordered to pay over $25 million in restitution. Additionally, 386 individuals were barred from practice and another 472 suspended.  You can bet that those numbers are going to sky rocket this year.

Investors have a “Bill of Rights” designed to protect their interests and investments from acts of fraud or wrongdoing. Brokers and financial investment companies, like in any other profession, have obligations to their clients. These include, but are not limited to:

  • Duty of Good Faith and Fair Dealing – Brokers must reflect honor and integrity. They may not trade securities without investors permission, excessively trade to increase commissions or misuse funds.
  • Duty and Knowledge of the Customer and Financial Conditions – Brokers must learn about the investor’s financial conditions before making recommendations.
  • Duty of Requirement of Suitable Recommendations – Recommendations must be aligned with the investors financial condition, investment, objectives and risk level.
  • Duty of Loyalty – Brokers must continually put the investor’s interests first
  • Duty of Disclosure – Brokers must remain truthful, including communicating risks, relating to any investment decision.
  • Duty of Authorization for Trading – Brokers are only to execute trades with permission from investor.

If a financial advisor or stockbroker has not fulfilled his or her obligations and that breach of duty to any of the above examples has caused a loss of money, then compensation through a claim can be pursued.

But how do you tell if you’ve been a victim of investment or securities fraud? It’s not always easy to determine, but here are some telltale signs of investment fraud:

  • An excessive number of stock trades
  • Sudden and unexplained losses
  • Withdrawals from your accounts without explanation
  • Trades not authorized appearing in your account
  • Brokers or firm not responding to calls or emails

When the financial market climate goes bad, investment fraud and stockbroker misconduct and negligence become obvious more than ever. Whether it’s recommending unsuitable investments, making false statements, omitting material information or simply just negligence, when a broker fails to comply with the laws and regulations that govern their conduct and responsibilities, causing you to lose money,  there is a right to file a claim against them and the firm that supervises them.  If you want a FREE consultation with an experienced attorney to discuss your losses, please contact us at any time.