Types of Securities Claims

Investment and Securities Fraud Lawyer - Levin, Papantonio, Thomas, Mitchell, Rafferty & Proctor, P.A.

Stockbrokers, registered investment advisers and financial planners are required to deal with their clients with the utmost integrity. They are not permitted to place their own interests ahead of their clients. This duty is often called a fiduciary duty because they are in a position of trust. If the stockbroker or investment adviser breaches that fiduciary duty and causes you injury, you may have a stock fraud claim and may be able to recover damages for any losses caused by the stockbroker's misconduct.

The federal and state securities laws protect investors from material misstatements of fact as well as the failure to disclose a material fact in connection with the purchase or sale of securities. Since securities are defined very broadly, these laws may apply to many different financial instruments. In addition to misstatements and omissions in connection with the purchase or sale of a security, there are a number of other types of securities fraud claims including the following:

Unsuitable Securities Claims

Stockbrokers must be licensed by FINRA (the Financial Industry Regulatory Authority). Consequently, they are subject to FINRA's rules. One of the fundamental rules imposed by FINRA is that stockbrokers are required to make appropriate or suitable recommendations to their customers based on their tolerance for risk and investment objectives. "Suitability" is determined by your income, net worth, age, investment objectives, risk tolerance and other factors. Your stockbroker may also violate the suitability rule by failing to properly diversify your investment portfolio or by concentrating too much of your portfolio in one asset class or in volatile, risky securities. The recommendation and sale of unsuitable investments constitutes securities fraud and if you experienced a financial loss, you may have the basis for a securities fraud claim.

Churning and Unauthorized Stock Trade

Your stockbroker is never authorized to trade on your behalf without your fully informed approval or without written authorization. Unauthorized trading violates industry regulations and can be the basis for a claim against the broker and the stockbroker's firm. Churning or active trading occurs when your broker convinces you to make multiple trades in your account or recommends that you swap or flip products such as annuities or mutual funds, which are typically long-term investments, that is not in your best interest. Instead, recommendations to buy and sell securities or investment products can be designed to benefit the stockbroker by generating commissions at your expense. Academic and industry studies indicate that buying and holding a well-allocated portfolio over the long-term is in the best interest of the investor. Churning is a fraudulent scheme designed to generate more commissions. A profitable account or a profitable trade is not a defense to churning. If you have been the victim of unauthorized trading or churning, call us.

Breach of Fiduciary Duty

Securities brokers and investment advisors are fiduciaries that owe their customers a duty of loyalty and care. A broker or investment advisor, as an agent of the customer, stands in a special relationship of trust, confidence and responsibility, with certain obligations to his customer. Because of his position as a licensed professional, investment advisors and securities brokers hold themselves out as being trained, experienced, and able to render specialized service. The level of loyalty and care owed depends on the type of accounts held by the investors or the relationship between the parties. In a discretionary account the broker can manage the customer's portfolio without obtaining explicit customer approval for each individual transaction. On the other hand, for a non-discretionary account the broker is required to get customer approval before making trades, to research every recommendation, to make full and complete disclosures, and to place an order in a timely manner.

Brokers and investment advisors have several obligations. First, a broker or investment advisor must manage accounts in a manner directly in line with the needs and objectives of the customer. Investment advisors must keep abreast of changes in the market, which could affect his customer's interest, and they must act responsively and sensibly to protect those interests. Investment advisors have an obligation to keep his client up to date on each completed transaction. Finally, brokers and investment advisors must explain the impact and potential risks of the recommended trading strategy.

Since investors are expected to place their trust in their stockbroker or investment advisor whom they rely upon for expertise in making the investment decisions, they are held to an extremely high standard regarding their duties of loyalty and care and must conduct themselves with the utmost good faith and integrity.

If you believe your investment advisor breached his or her fiduciary duty to you, and this breach resulted in losses in your account, contact us for a comprehensive and confidential investment advisor fraud evaluation with no obligation.

Failure to Execute Securities Orders

Your broker is allowed “a reasonable time” to execute your securities orders. However, if you asked your broker to sell a stock or if you had a stop loss order or something similar, and your broker failed to execute it in a timely manner, and the stock you were attempting to sell lost significant value during the delay, you might have a claim against your broker for failure to execute. Additionally, a claim may also arise if your broker refused to sell or dissuaded you from selling specific securities after you gave him or her instructions to do so.

Failure to Supervise Stockbrokers

All FINRA member firms and managers within those firms are obligated to supervise their stockbrokers. They also have an obligation to review the statements relating to your securities investment and trading accounts for potential problems including unsuitable securities, unauthorized trading, and churning. In most situations where your broker has violated the securities laws and regulations, the broker's firm and manager may be liable for failing to supervise his or her activities as well.

If you or a loved one has been harmed by stockbroker or investment fraud, please fill out the evaluation form on this website, call our office at (855) 345-1554, or email our experienced investment and stockbroker fraud lawyers today. We'll evaluate your claim for no cost and help you get the justice you deserve.