Client Recoveries: How to Protect Yourself Against Stockbroker Misconduct
As a client, you expect your stockbroker to act in your best interest, but unfortunately, not all brokers meet this standard. Securities-related claims involve different individuals, circumstances, lawyers, and decision-makers, so there’s no guarantee that you’ll receive a recovery or a favorable hearing. However, there are steps you can take to protect yourself against broker misconduct.
Here are some examples of successful recoveries we’ve made on behalf of our clients:
- A disabled victim of medical malpractice had their proceeds invested in speculative securities and options without their authorization, resulting in the loss of the entire account.
- A divorce settlement was invested in speculative securities without diversifying the account, disregarding the client’s financial condition.
- An unsophisticated widow was sold high-yield junk bonds fraudulently.
- A disabled physician lost nearly all of their life savings due to the fraudulent sale of worthless and illiquid direct participation programs.
- An older executive, fully vested in company stock options, invested the proceeds in technology and internet-related securities against their stated investment objectives.
- A broker advised a client to take early retirement and invested their life savings in speculative securities on margin, leading to a substantial loss of the entire account.
- An 82-year-old widow’s account was traded on margin without authorization, resulting in losses in technology and other securities.
- A broker fraudulently sold unsuitable and proprietary Class B mutual fund shares to avoid quantity discounts associated with the purchase of Class A shares.
- A licensed stockbroker illegally sold unregistered promissory notes to senior citizens and retirees outside of his firm’s approval.
- A younger couple was sold long-term certificates of deposit under the guise that they were traditional bank CDs.
- A customer’s securities account was over-invested on margin, which hindered their ability to pay living expenses.
- A tax-free annuity was fraudulently sold to a widow in an otherwise tax-deferred retirement account, garnering excessive fees.
- An over-the-counter brokerage firm fraudulently sold “house” stocks, which were otherwise worthless, to senior citizens and retirees.
These are just a few examples of the common claims against brokers. Stockbrokers and investment professionals have a duty to act in the customer’s best interest, placing their interests above their own or their employer’s. Federal securities laws prohibit any material misstatement or omission of fact in connection with the purchase or sale of securities. Misstatements include mischaracterizations or false statements about a particular security, issuer, or a company’s business prospects. Omissions include the failure to disclose facts that would render other statements materially misleading. A statement is material if it’s important enough to affect a reasonable investor’s decision-making process.
Other forms of stockbroker misconduct include suitability, excessive activity or “churning,” margin account fraud, unauthorized trading, breach of fiduciary duty, financial suicide, mutual fund fraud, failure to execute, failure to supervise, sale of unregistered securities, and variable annuity fraud.
To protect yourself against stockbroker misconduct, it’s important to work with a reputable broker and to thoroughly understand any investment opportunities before committing. Keep an eye out for red flags, such as unsolicited investment offers or pressure to make quick decisions. If you believe your broker has engaged in misconduct, contact an experienced securities attorney to discuss your options.