Stock Broker and Financial Advisor Misconduct

The following are some of the most common types of broker misconduct that give rise to legal claims allowing you to sue your broker or brokerage firm. This is not an exhaustive list; if you have questions regarding your broker’s potential misconduct or believe you have been targeted by an investment scam, our attorneys can work with you to evaluate your potential claims.

Stock brokers, investment advisors, and financial professionals have a duty to understand their clients’ financial circumstances and to recommend only suitable financial products or trading strategies based on their clients’ desired level of risk. Investment professionals who recommend unsuitable investments can be held liable when their recommendations result in major losses.

For example, a stock broker putting an 80 year old investor into 20 year bonds or highly speculative stocks can be considered an unsuitable investment.

A diverse investment portfolio can protect investors from excessive losses in a single sector or type of investment. A properly diversified portfolio includes investments in different companies, different market sectors, and different types of investments. If a broker or financial advisor fails to diversify an investor’s portfolio it can create an excessive risk of loss, which is known as overconcentration. Overconcentration of an account is not suitable for most investment portfolios.

Common examples of over concentration include:

• Investing too large a percentage of the client’s portfolio in a single company
• Investing too much in a single market sector (such as technology, healthcare, pharmaceutical, etc.), leaving the investor at risk with normal market fluctuations
• Investing in only one type of security, such as only common stocks (including mutual funds that invest in common stocks) rather than a mix of common stocks, preferred stocks, and debt instruments (bonds)

When a broker or financial advisor performs excessive trades to generate commissions, this is known as “churning” and is a violation of the law. Brokers who engage in churning can be held liable for the commissions paid and losses associated with the broker’s recommendations.

• Failure to Execute or Follow Instructions
  Failing to promptly follow an investor’s directions to buy or sell securities
• Forgery
  Falsifying investment documents and account statements, including client signatures
• Material Misrepresentations and Omissions
  Mischaracterizing or failing to disclose important information about a recommended investment, typically information about significant risks

If you think your broker took advantage of you or a family member, there are steps you can immediately take to fight back:

1. Don’t delay
   Every legal claim has a certain amount of time in which you must file a lawsuit (known as a “statute of limitations”). If you don’t act within that time period, you may lose your ability to sue your broker. Sometimes when investors discover that they have been defrauded, they feel embarrassed and ashamed; this can paralyze people and prevent them from seeking help or taking quick action. Reacting rapidly when you discover a possible fraud is incredibly important because the passage of time may affect your rights.
2. Gather your documents
   Financial statements, stock trades, customer agreements, emails, and other correspondence with your broker could be relevant and useful.
3. Consult with an experienced financial fraud lawyer
   Our skilled financial fraud lawyers can conduct an account audit to determine the full extent of your damages and determine whether misconduct occurred. Brokers or financial advisors who commit one type of fraud or scam often don’t stop there — understanding the full extent of the harm is critical to determining how best to proceed.

Scott Silver

Scott focuses his law practice on securities arbitration and litigation and plaintiff-side class action litigation, representing individual investors and institutions in claims against brokerage firms, investment advisors, commodities firms, hedge funds and others.

Eileen Epstein Carney

Eileen is involved in the firm’s securities practice and has over a decade of experience in the legal world. She received her law degree from American University in 2005.

Dave Stein

David’s advocacy has generated major recoveries for consumers impacted by financial fraud. He was named to the Top 40 Under 40 by Daily Journal and a “Rising Star in Class Actions” by Law360.

Amanda Karl

Amanda is spearheading a securities lawsuit against NantHealth concerning fraudulent statements to investors about the success of its key product.