In a previous blog post, we looked at the ins and outs of stock broker fraud. But how can you really tell that you’re a victim? After all, a stock broker should be someone you can trust to make sound financial decisions on your behalf. The reality is that many stock brokers in the Tri-State area put their interests above those of their clients. Consequently, the door opens for investment fraud. Keep reading as we dive into the signs of stock broker fraud and what you can do to protect the investments you’ve worked so hard to earn.
- Unsuitable investments – Some folks are pressured to invest in securities they didn’t fully understand. Others trade on margin without being aware of the added risks. If you fall into either of these categories, chances are that your stock broker recommended unsuitable investments. Keep in mind that he or she must learn about your risk tolerance, income, investment experience, other assets, financial needs, and investment goals before recommending an initial investment. A stock broker should never take a cookie-cutter approach. If they suggest investments that don’t match your specific financial goals, the risk of fraud comes into play.
- Misrepresentation of information – This occurs when misleading information is provided, thereby impacting the investment decision. This consists of everything from not disclosing sales-related compensation to liquidity and risks. Remember that all investment recommendations must be reasonable, while all relevant information to the decision must be disclosed by the stock broker.
- Overconcentration – It might not initially seem like a big deal, but a stock broker should not put too much money into just one or two different stocks. Taking it one step further, they aren’t supposed to buy too many stocks in the same industry. Essentially, overconcentration involves a broker’s failure to diversify a portfolio to provide protection against a decline in value of one specific investment.
- Unauthorized trading – A broker who buys or sells securities in an investor’s account without prior consent has engaged in unauthorized trading. Only in rare instances can a stock broker transact on your behalf.
- Churning – A sizable chunk of stock brokers are paid by commission, meaning there’s incentive on their end to increase the frequency of transactions. Be aware that excessive trading also qualifies as fraud.
- Illegal accounts – Another example of stock broker fraud is placing money in a stock broker’s own investment account or setting up false accounts. Red flags should go up if he or she ever recommends using an address other than your home or business or going so far as to suggest lying on an investment account application.
- Unlicensed or unregistered – It’s important to know that all brokerage firms, investment advisors, and stock brokers must be registered to sell securities. Not to mention, every product sold is required to be registered according to state and federal guidelines. Therefore, noncompliance with securities laws and regulations falls in line with stock broker fraud.
The Experts in Securities Litigation
Our experienced securities arbitration and litigation attorneys recover losses from investment misconduct statewide and throughout the U.S. For two decades, the law firm of Sadis & Goldberg has represented investors, investment advisers, industry professionals, and brokerage firms in the industry. The results speak for themselves, as we’ve won countless multi-million dollar securities arbitrations, verdicts, awards, and settlements. Unlike other law offices in the area, we don’t just simply dabble in securities arbitration. Rather, our attorneys do what they do best, which is recover losses for investors with claims against financial advisers, stockbrokers, and brokerage firms. In addition to stock broker fraud, we also handle the following:
Speak to a lawyer today.