Hiring a stockbroker cannot guarantee success in the stock market, but it does entitle you to service that meets certain professional standards. Your stockbroker is required to manage your money honestly, professionally, and prudently. Whether done intentionally or through incompetence, when your stockbroker mismanages your funds, the financial effects can be devastating to you and your entire family.
A stockbroker’s duties to his or her clients are outlined in both state and federal securities laws, as well as professional guidelines set forth by the New York Stock Exchange and the National Association of Securities Dealers. In addition to these specific rules, stockbrokers are expected to perform to certain minimum standards of competence for their profession.
What is Investment Fraud?
Stockbroker fraud (also referred to as investment fraud) occurs when a stockbroker makes recommendations and claims that are inaccurate or that are primarily intended in the broker’s best interests rather than the clients. These fraudulent recommendations and actions might include making outright false statements, leaving out important information (factual omissions), intentional exaggerations, and other mischaracterizations.
Other types of stockbroker malfeasance that may constitute fraud include failure to properly and promptly execute orders and performing unauthorized and/or excessive trades. It can often be difficult to establish fraudulent behavior as not all bad trades or stock market losses are attributable to fraudulent activity. Honest and competent stockbrokers can make mistakes and bad recommendations without it rising to the level of fraud, and investments always carry some degree of risk. It is only when a stockbrokers or brokerage houses engage in self-serving behaviors to the detriment of their clients, or when they fail to uphold a minimum standard of care and competence that activities are considered fraudulent.
Violations Stockbroker’s Can Make
If you believe that you have been the victim of stockbroker fraud, one of the first things you can do is research your broker’s record to establish whether previous complaints have been filed against him or her. The National Association of Securities Dealers offers a comprehensive online service called the Central Registration Depository (CRD), which allows you to research any of their approximately 500,000 members and see detailed information on their history including professional qualifications and employment history as well as any reports of misconduct and previous fines and settlements for violations such as
- Unsuitable recommendations
- Over concentration
- Excessive trading, referred to as “churning”
- Unauthorized investments
- Breach of fiduciary duty
Misrepresentations and omissions can take a number of forms. Examples include when a stockbroker falsely guarantees returns on an investment perhaps claiming to have insider information on a company or when a broker leaves out relevant information when recommending a stock.
One of a stockbroker’s major responsibilities is to guide clients to investments that are appropriate to their needs, interests, and level of expertise. This includes recommending appropriate investments according to risk, diversity, long-term goals, and other factors. Based on this profile and the information available, your stockbroker is responsible for recommending a stock profile that is appropriate for your specific needs and interests. Unsuitable recommendations may cause significant financial damage, particularly for clients new to investments.
One of the most important factors in building a successful stock portfolio is diversification. This tactic can help spread out your risk, so that losses from a specific company or sector are mitigated by other holdings in other markets and companies. When a stockbroker over-concentrates your portfolio in too few companies, or too few markets, you run a great risk of incurring significant stock losses as a result of normal market fluctuations.
Some unethical brokers, when given discretionary authority over an account, will engage in excessive buying and selling in order to increase their commissions. Known as churning, this practice rarely benefits the client and is primarily intended to drive up profits for the stockbroker. Other claims may arise from the practice of churning including negligence, breach of contract, common law fraud, and breach of fiduciary duty.
In some cases, a stockbroker who has not been given discretionary authority over your account may make trades without your prior approval. This could include cases in which your specific instructions are ignored and cases in which the broker makes trades without consulting you first and obtaining approval. In certain situations, this can lead to claims for breach of contract or fraud as well.
Breach of fiduciary duty can describe any number of types of claim. Fiduciary duty is a professional standard of care that is required of a person legally entrusted with your finances. This fiduciary duty is a good faith commitment to put your interests and goals above all others in offering advice and making decisions about your investments.
Speak with a Stockbroker Fraud Lawyer Today
If you or someone close to you believes you have been a victim of stockbroker fraud, please call our Orlando stock broker fraud attorneys today to speak with an experienced securities fraud attorney. We can help you determine whether you have a claim and fight to get your money back.
What Is Securities Fraud?
Securities fraud describes the act of intentionally using deception to persuade an investor to make a financial decision based on false information. In cases of securities fraud, an investor places his or her own best interests ahead of the best interests of the client.
Securities fraud can manifest in a wide range of different forms, some of the most common of which include:
- Unauthorized investments
- Misrepresentations and omissions
- Unsuitable recommendations
- Breach of fiduciary duty
- Over concentration
If a stockbroker or other financial advisor acted negligently and you suffered financial losses as a result, you need to know your rights. An experienced attorney can listen to the details of your situation and explain your legal options.
How Do I Know If I’m a Victim of Stockbroker Fraud?
Just because you experienced a loss from an investment doesn’t mean that you are the victim of stockbroker fraud. The stock market – and other investments – are not without certain inherent risks.
However, if you suffered a financial loss because your broker misrepresented facts or failed to reveal information in a timely matter (or at all) you may have grounds to pursue justice for their wrongdoing.
Some of the most common signs of stock fraud include:
- The stockbroker made wild claims: Negligent stockbrokers may use wild claims to persuade people into a bad investment, such as: “You’re guaranteed a high return on this one!” or “It’s worth borrowing money for this investment – the return is going to be huge!”
- The stockbroker pressured you to invest: In order to work with your best interests in mind, your stockbroker needs to understand your financial goals, income streams, risk tolerance, and investment experience. If a stockbroker pushed you to act in a way that does not align with your situation, it could constitute negligence.
- The stockbroker ignored your wishes: Although the stockbroker may have been given the authority to act on your behalf, they should act in accordance with your goals and risk tolerance. If excessive trades were made or you noticed an overconcentration of assets in a specific industry or stock, you may be the victim of fraud.
One of the best ways to determine whether or not you may be a stock fraud victim is to speak with an attorney with experience in these complex matters.
Do I Need to Hire a Lawyer for Stock Fraud?
Investors depend on their stockbrokers to manage investments ethically and competently. Unfortunately, the trust given to stockbrokers isn’t always rewarded and in some cases, it is betrayed. Some financial advisors, brokers, and firms mismanage investments intentionally for their own best interests at the expense of investors, the very people they are supposed to be helping.
If your stockbroker committed fraud and you suffered losses as a result, you owe it to yourself to speak with an attorney. As an investor, it can be extremely difficult to take legal action against a broker or firm that wronged you. It is best to hire a stockbroker fraud lawyer who has experience with the intricacies of fraud cases and is prepared to fight for your rights and best interests.
What Does a Stock Fraud Lawyer Do?
In general terms, stock fraud lawyers are attorneys who specialize in the laws that govern the securities industry. They assist investors who have incurred a monetary loss because of fraud and advocate for those who seeking justice against a stockbroker, financial advisor, or other investment professional.
A stock fraud lawyer handles cases in which someone broke the law or defrauded an investor. These cases may be handled through FINRA arbitration, federal court, or another forum.
The attorneys at Colling Gilbert Wright & Carter investigate firms and financial advisors who have committed fraud against their clients and caused subsequent harm. We help our clients recover their losses through FINRA arbitration, or, when appropriate, through lawsuits in federal or state court.
How Do I Choose a Stockbroker Fraud Lawyer?
If a fraudulent stockbroker has caused you to sustain a financial loss, you should speak with a qualified attorney as quickly as possible. Of course, with the multitude of lawyers to be found online, on TV, on the radio, and elsewhere, it can be difficult to know which lawyer or law firm is best equipped to recover your losses and protect your best interests. If you are looking for a reputable stockbroker fraud lawyer, consider these qualities:
- Extensive experience handling cases of stockbroker fraud and other types of securities and investment fraud
- A proven history of success
- Favorable client reviews and testimonials
The stock market fraud lawyers at Colling Gilbert Wright & Carter have substantial knowledge and experience with a wide range of fraud cases. Our proven track record of successful outcomes speaks for itself.
If you suffered losses due to the fraudulent or negligent actions of a broker, firm, or financial advisor, our lawyers want to hear your story. You can contact our office for free and discuss the merits of your case with a seasoned attorney. If you are the victim of wrongdoing, we will explain your rights and legal options.
How Do You Report Stock Fraud?
You have several pathways to report stock fraud in the United States. No matter which option you decide upon, it is critical that you take action as soon as possible. Acting quickly improves your chances of achieving justice against a broker, advisor, or firm.
To report fraud:
- Report the fraud to the U.S. Securities and Exchange Commission (SEC)
- Report the fraud to applicable state or federal agencies
- Contact a stock fraud lawyer
After being the victim of securities fraud, you have a limited window of time (known as the statute of limitations) in which to recover your losses. The statute of limitations can vary for securities fraud claims, depending on whether you attempt to recover your losses through the courts or FINRA arbitration. If you seek justice through the court system, securities fraud claims are subject to a maximum of five years from the date of the fraudulent act or omission. If you choose to recover your losses through FINRA arbitration, you have six years from the date of the fraudulent act or omission in which to seek recovery.