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Stockbroker Fraud Defined | Colling Gilbert Wright and Carter

What Is Stockbroker Fraud?

The stock market is a complex industry that very few people have mastered over the years. Investing is a constant gamble, which is why so many people trust their hard-earned money to stockbrokers who will play the investment game for them. Unfortunately, many stockbrokers don’t have your best interests in mind and may mismanage your funds, leaving you and your family in a financial bind.

The knowledgeable stockbroker fraud attorneys at Colling Gilbert Wright & Carter have substantial experience in a broad range of complex investment matters. If you’ve suffered losses due to a stockbroker’s negligent actions, our lawyers want to hear your story. We can help you seek justice and maximize your recovery.

Did My Stockbroker Commit Fraud?

Stockbroker fraud, or investment fraud, happens when your stockbroker comes to you and offers recommendations that are inaccurate and designed to help them more than you and your family. A lie by omission is still a lie, so when your stockbroker fails to list the associated risks of a particular stock, they are committing fraud by leaving out pertinent information or offering inaccurate details. They may provide outlandish promises such as doubling your investment overnight.

Other forms of stockbroker fraud include:

  • Failure to deliver or accurately deliver executive orders on your funds.
  • Executing excessive trading practices, referred to as “churning.”
  • Unauthorized trades using your funds.
  • Over-concentrating of stocks such as investing too large of a percentage in a single sector, market, or company. A diversified portfolio is essential to stock market success.
  • Poor recommendations based on false statements or corporate misrepresentation.
  • Breach of fiduciary duty, which occurs when a stockbroker fails to take your financial stability, associated risks, tax obligations, goals, and other facets into account when managing your investments.

If you suspect stockbroker fraud, it’s essential to get in touch with an attorney who specializes in this legal area as soon as possible. Our Orlando attorneys can answer your stockbroker fraud questions and help you seek compensation.

3 Warning Signs of Stockbroker Fraud

When you decide to make a significant investment with a stockbroker, you need to research the individual and their company, especially to make sure they have the appropriate training and credentials to trade on your behalf. Some of the biggest indicators of stock market fraud include the following:

1. Your Stockbroker Makes Wild Claims

It’s illegal for stockbrokers to have insider information, but that doesn’t stop some from claiming they do. Stockbrokers will use that and other tactics to push their clients toward risky investments that will benefit the stockbroker and their firm more than you. Be wary of the following statements:

  • “It’s the next big thing!”
  • “This is a hot stock – you better act now!”
  • “It’s worth borrowing money to invest in this one – your return will be huge!”
  • “You’re guaranteed a high return on this one!”

Watch out for a stockbroker who claims that a new stock will be extremely lucrative. A good investment will still be a good investment in the future, and you shouldn’t need to take swift action in order to get a decent return.

A solid investment portfolio is created by measured decisions that increase your return over time. While there are some exceptions, a stockbroker using exaggerated language to nudge you toward immediate investments may be engaging in fraud.

2. Your Stockbroker Pushes You to Invest

Your stockbroker is bound by fiduciary duty, meaning they’re charged with putting your interests first. This means that your stockbroker should take the time to understand the following about you before making recommendations or trades on your behalf.

  • Risk tolerance
  • Investment experience
  • Financial needs and goals
  • Income streams

If your stockbroker wants to make moves that don’t align with your circumstances, they’re not only untrustworthy; they are at risk of investment fraud.

3. Your Stockbroker Ignores Your Wishes

While you may have given a stockbroker the authority to act on your behalf, their actions should fall in line with your goals and risk appetite as discussed above. If you notice excessive trades or an overconcentration of assets in a certain stock or industry, this constitutes as stockbroker fraud.

If you’re someone who’s more involved in your investment portfolio, you’re not immune to fraud. Some brokers will fail to execute your orders or fail to do so in a timely manner, both of which are illegal. If a stockbroker is persuading you to authorize certain trades by misrepresenting or omitting facts, you may also be the victim of fraud.

Common Questions About Stockbroker Fraud

When you’re looking to invest your hard-earned money it’s always important to perform your due diligence before making any important decisions. It’s wise to research any investment opportunity as well as look into and vet any stockbroker or financial professional you may potentially work with.

Stockbroker fraud, unfortunately, happens all too often. However, many people—especially new investors—may not have enough knowledge and experience to keep their money safe. At Colling Gilbert Wright & Carter, our attorneys have extensive experience helping individuals who’ve had the misfortune of dealing with fraud. In our years of helping investors, there are certain questions we often get asked. Below we outline some of those questions so that you may be more prepared for when you invest.

What Constitutes Investment Fraud?

The act of investment fraud is when a stockbroker or financial professional acts intentionally or grossly negligent with your investment, generally to benefit the broker and not the client. This can occur if the broker or financial professional tries to influence or control the market or uses deceptive practices, such as giving misleading advice that ends up benefiting the broker and not the client.

What Is Securities Fraud?

Securities are two kinds of investment: stocks and bonds. Securities fraud generally occurs when a broker, financial professional, or corporation uses illegal acts to manipulate the investment market to benefit themselves.

What Are My Options if I’m a Victim of Securities or Investment Fraud?

While every case is different, most fraud cases can be handled through either mediation, arbitration, or through the courts. If you enter into a contract with a broker, many contracts state that any disputes must be handled through binding arbitration and not through the courts. No matter if you have a binding contract or not, if you believe you’ve been the victim of fraud, it’s important to contact an experienced investment fraud attorney to help you get justice and compensation for your losses.

Contact a Stockbroker Fraud Attorney in Orlando

If you’ve been a victim of stockbroker fraud, please contact our stockbroker fraud attorneys in Orlando today at (407) 712-7300 for a free case evaluation. Colling Gilbert Wright & Carter serves clients in Orlando, Florida and nationwide.