SECURITIES ARBITRATION LAWYER
How can you tell if you have been a victim of stockbroker fraud? If you have experienced losses in your savings or investments due to one of the following typical
forms of stock broker fraud or misconduct, you have the right to file a claim and recover your losses.
Whenever the Registered Representative makes an investment recommendation it must be suitable to investor's individual financial needs. Suitability is determined by analyzing many different factors unique to the particular investor. Factors such as age, investment experience, time horizon, employment status, net worth, risk tolerance, and others combined give the broker a picture of what investments are suitable for that particular individual. When losses occur because recommendations are made without having obtained this necessary information, or if the recommendations are not suitable from an objective standpoint, investors have the right to file a claim and recover their losses due to lack of investment suitability.
Over-concentration in a single stock, industry or sector can lead to increased volatility (fluctuation) in the investor’s accounts. Failing to diversify an over-concentrated portfolio can also increase investment risk exposure as opposed to the properly allocated portfolio. It is crucial that the stockbroker properly diversifies the investments to minimize the overall risk of the portfolio.
Churning is perhaps the most obvious form of abuse among Registered Representatives, although not always apparent while it is occurring. When Representatives buy and sell investments on behalf of the client in their brokerage account, typically they receive a commission for executing these transactions. If the amount of the transactions is unreasonable or unsuitable for that particular investor’s account, the presumption arises that the Representative made these trades in order to generate commissions, not for the investor’s best interest. This self-dealing may or may not be obvious while it is occurring, but looking at the commissions charged over a 6–12 month period of time can reveal evidence of its occurrence.
With the exception of accounts traded on discretionary basis, FINRA and NFA registered representatives are not authorized to make trades prior to obtaining investor’s permission. This investment industry rule applies to each and every individual securities transaction throughout the serviced accounts. If the stockbroker did not contact the investor before placing buy or sell order and did not obtain investor's agreement or permission to trade on discretionary basis, the stockbroker may be found liable of unauthorized trading and further subjected to disciplinary charges.
When a Representative intentionally gives an investor misleading information regarding that investor’s stocks, bonds or other securities, that Representative is liable for losses in the account caused by misrepresentation or omission. Examples of this type of fraud include guarantees regarding stock or mutual fund performance, failure to accurately disclose an individual security’s risk, failing to disclose commissions generated or fees charged.
It is management’s responsibility to supervise each and every Representative and each and every investment account. In order to keep track of the many customers and multitude of accounts that a typical Representative oversees, management must have compliance and oversight procedures in place. Failure of management to generate, follow or enforce these procedures will cause management to be responsible for the losses in addition to the individual Representative. While multiple recoveries are not awarded, a panel of arbitrators will consider the role of management in preventing the losses in the first place, and will hold management liable for failing to supervise the account.