Many Americans have suffered serious financial losses as the result of stock broker fraud and misconduct. All too frequently, a stock broker may fail to fulfill or deliberately violate his or her legal and ethical obligations to a client. In most cases of stock broker fraud and misconduct, the broker’s employer, often a large brokerage firm, will be obligated to pay the damages.
You should contact the experienced stock fraud lawyers at the law firm of Larry Moskowitz & Associates, P. A if you have suffered a loss as a result of the following types of matters:
Recommending Unsuitable Investments: A great investment for one person might be a foolish investment for another. Stock brokers are required to know their customers and to ensure that each recommended investment is suitable for that customer in light of factors such as the customer’s age, financial status, ability and willingness to handle risk, investment knowledge and experience, and investment objectives. If you have lost money in an unsuitable investment, the broker may be responsible.
Misrepresenting or Omitting Facts: Some brokers misrepresent the facts or lie about the factors you need to understand in making an investment decision. Other brokers who misrepresent or omit facts are simply careless. Whether the broker’s misrepresentation or omission is fraudulent or simply negligent, if it caused you to make a poor investment, the broker may be liable for your loss.
Excessive Trading or “Churning.” Any stock broker who is compensated by commissions, earns that fee whenever you buy or sell, regardless of whether you make money or lose money. When a broker engages in excessive trading in order to generate commissions, that practice is called churning, and churning is fraud. Your broker can be sued for churning your account.
Engaging in Unauthorized Trading: In most instances, a stock broker is permitted to buy or sell a security only after receiving your permission to do so. But sometimes, brokers engage in unauthorized trading. Unless you have given the broker the right to exercise his or her own discretion in handling your investments, unauthorized trading is a violation of your rights. The unauthorized trades can be voided and resulting losses can be recovered from your broker.
Failing to Follow Instructions: A stock broker usually is obligated to follow your instructions with respect to buying or selling a stock. If you instructed your broker to buy or sell a stock and he or she failed to do so, the upward or downward movement of that stock might have resulted in a loss. Failure of a broker to follow your instructions, and even improper pressure to change your instructions can be grounds for recovering your loss.
Price Manipulation: Manipulating the price of a security is a violation of state and federal securities laws. Unfortunately, a few stock brokers falsely promote an investment through high-pressure sales strategies. This may drive the price of the security up and allow the broker to sell shares they previously purchased at substantially lower cost. Many times, when brokers manipulate the price of a security, they will refuse to allow an individual to sell their security, so this should be a red flag if it happens to you.
Over-concentration: Proper diversification of assets is one of the best ways to control investment risk and avoid excessive losses. If a stock broker concentrates too much of your portfolio in one type of investment, (such as stocks), or puts too much of your money in only one or two different stocks, or buys too many stocks in the same industry, you face a much greater risk of suffering a large loss. For instance, millions of investors lost money beginning in early 2000 because their brokers had over-concentrated their accounts in high-flying technology stocks that soon plummeted to earth. A broker who fails to recommend a properly diversified account can be liable for some or all of your losses.
Mutual Fund and Variable Annuity Sales Abuses: There are many ways in which brokers betray their customers through the sale of mutual fund shares and variable annuities. For instance, brokers will sometimes switch customers from one fund or annuity to another, at great cost to the customer, for the sole purpose of earning commissions. They will sell variable annuities to customers who shouldn’t own such annuities, again in order to earn high commissions. Brokers who engage in these and other violations involving mutual funds and annuities are guilty of sales abuses that may subject them to liability.
Misappropriation and Other Criminal Activity: Occasionally, a stock broker will engage in criminal acts like theft, fraud, and forgery. In essence, the broker hatches a scheme to steal your money. You have the right to seek recovery for any fraudulent conduct that results in misappropriation of funds by a broker.