Probably most of us turn to a stockbroker or a financial planner to invest our savings. Our own expertise is in some other area and we rely on a financial expert to make the right investment decisions for us. Most brokers do a fine job, but sometimes a person finds they have unaccountably lost money and that their trust was misplaced.
Your broker should be making decisions for you based on facts about your:
- Tolerance of risk
- Financial goals
- Income and amount of savings
- Financial needs
If the broker fails to consider these things or willfully ignores them in favor of his own pocket lining, you may have a valid claim for recovering your losses.
Types of Stock Fraud
Part of your broker’s job is to know you as a customer – know those things bulleted above and respect them. When investments are made in violation of those facts it is known as Lack of Suitability. If it can be proved, it is grounds for a lawsuit.
When a broker knows his or her customers he can protect their financial interests by recommending investment choices that will match each customer’s profile. If the broker misrepresents your investments to you, by outright falsehoods or by omitting some information, this comes under the headingMisrepresentations and Omissions. In some cases, a corporation is guilty of this by misrepresenting its financial health to brokerage houses.
Churning is the unnecessary moving of money between different funds and is one way a broker can increase his commissions while risking or losing your money. Unauthorized trades are another broker mis-step where he or she fails to obtain your permission to make trades.
Overconcentration is lack of diversification. To protect your invested funds it is wise to apportion them among several different investment areas such as bonds, stocks, and annuities. When your broker fails to do this and you lose a lot in the failure of a single company or single industry, you may have a valid legal claim.
Annuities are a preferred investment among older people and Annuity Fraudcan be especially devastating if a retired person loses his income.
Arbitration or Court?
If your brokerage firm required you to sign an arbitration agreement at the start of your dealings with it, you cannot then take them to court if a problem arises. However, many people choose arbitration over a court trial. Both means of resolution involve thorough investigation and take some time. All the above types of stock fraud can be resolved through arbitration.
The most important thing to do if you find that your broker has behaved illegally or unethically with your funds is to contact an experienced stock fraud attorney. Please contact us for a stock fraud attorney in your area.