What are you supposed to do when the professional stock broker you’re supposed to trust with investing your money commits fraud against you?
You’re supposed to hire a securities attorney to legally fight.
Stock brokers are bound by fiduciary duty to always act in the best interest of their clients; however, that doesn’t mean it always works out like that. Sometimes a stock broker puts his or her best interest first and takes advantage of client investments, resulting in a shocking and violating fraud.
If you or someone you know has been victimized by a stock broker, contact our securities attorney today. Stock brokers who attempt to take advantage of individual investors or investment firms deserve to be held accountable for their actions.
Understanding Stock Broker Fraud
It is important to know that not all stock brokers are trying to steal your money or commit fraud; however, there are some out there who don’t abide by the rules and get greedy. It is these people who must be legally punished so that you can retain the money you worked hard to earn and invest it in a way that will benefit you in the future. Moreover, just because your investment is not making money does not mean the stock broker has committed fraud. Gross incompetence and fraud are not the same thing.
With that being said, stock broker fraud can take many different forms:
- Unsuitable investments – A stock broker can quickly get to know your lifestyle and ideal level of risk. In fact, it is required for a stock broker to learn your tolerance, income, investment experience, and more about your financial needs before proceeding with investments. Therefore, he or she should know which types of investments to recommend you. Bad recommendations for your situation is a form of stock broker fraud.
- Omitting or misrepresenting facts – A stock broker cannot withhold facts or provide misleading information that can affect a decision about an investment. This type of information could be related to sales compensation, risk, liquidity, or other facts.
- Over-concentration – A stock broker should diversify your portfolio in order to prevent a concentration of your entire investment, or a majority of it, in one industry. Risk is reduced when a portfolio is diverse, which is why over-concentration in one investment area is considered a form of fraud.
- Unauthorized trading – As the investor, you are legally allowed to approve every purchase made for your account. An investment or decision made without your permission can be fraud unless the stock broker is granted discretionary authority or if he or she has been given detailed permission to do so.
- Churning – Also known as over-trading, a stock broker may buy and sell stocks an unnecessary amount of times. Stock brokers who are paid on commission are more likely to commit this type of fraud as they would possibly earn compensation on every transaction.
- Timely execution – By law, the stock broker is required to administer and execute your investment orders in a timely matter. It can be considered fraud if he or she does not promptly complete the request or order.
- Inappropriate variable annuity or mutual fund sales – If you qualify for Class A shares of an investment but are being sold loaded funds or Class B shares, or if your stock broker is switching unnecessarily between mutual funds to earn commission and for no other apparent reason, you are likely in the midst of a fraudulent scheme.
- Illegal accounts – A huge red flag for stock broker fraud is when the broker recommends lying on an investment account or using an address that doesn’t match your home or business. A stock broker may also be using illegal accounts if he or she is using client money to invest in his or her own investment account.
- Unlicensed or unregistered – It is legally required for all stock brokers, brokerage firms, advisors, and other securities salespeople to register themselves to sell securities. Moreover, the security products themselves must be licensed or registered according to state or federal guidelines. Therefore, any person handling investments without proper licensure or registration is committing fraud.
- Institutionalized brokerage fraud – Common in the ‘90s was a scheme for stock brokers to advertise an investment as objective when the broker would earn an undisclosed back-door payment from a bank with whom they are trying to develop a relationship. Another form of institutionalized brokerage fraud is when a stock broker sells IPO stocks to certain businesses or clients before they are officially released.
- Other fraudulent activities – There are a variety of other ways in which a stock broker can commit fraud against his or her clients, such as forgery, selling accounts that don’t yet exist, withdrawing from accounts without authorization, and misappropriation of funds.
How A Securities Attorney Can Help Fight Stock Broker Fraud
A trusted securities attorney can help clients fight a stock broker or firm from any of the aforementioned types of fraud as well as many others that were not discussed here. It is important to hold stock brokers to the rules and regulations of the SEC and other jurisdictions to protect the best interest of the investors as well as the economy as a whole.
Securities attorneys specialize in a niche of financial investment law in order to provide specific experience to clients in need. An attorney can help you through advocacy, settlement, litigation, and arbitration against stock brokers.
About Sadis & Goldberg
Sadis & Goldberg is a securities arbitration and litigation firm located in New York, but we serve clients nationwide. Our goal is to always protect and recover losses for investors. We work with small and large businesses as well as individual investors.
For 30 years, Sadis & Goldberg has obtained positive results for clients, earning multi-million dollar results for clients through settlements, verdicts, awards, and arbitrations. We have a team of highly experienced attorneys, including some with a background serving as attorneys for the SEC.
Learn more about how a securities attorney can help recover losses experienced by stock broker fraud. We offer free consultations.