If you have lost money due to broker misconduct or unsuitable recommendations, an experienced stock market attorney can help you recover your investment loss. Brokers and other financial professionals in the United States are subject to rules and regulations set forth by the Financial Industry Regulatory Authority (FINRA).
FINRA exists to ensure American investors are protected by regulating the broker-dealer industry. Common examples of broker misconduct, such as bad investment recommendations and unauthorized trading, can lead to substantial investment losses. Thankfully, stock market attorneys can help investors get their money back after a deal goes wrong.
Obligations Brokers Have to Their Clients
All brokers, financial advisors, investment advisors, and other financial professionals in the U.S. are required by law to follow FINRA rules and regulations. FINRA is a not-for-profit organization authorized by Congress.
Financial professionals must also follow federal law and are required to register with the Securities and Exchange Commission (SEC). Both FINRA and the SEC ensure that investments are made soundly, and customers are protected from corrupt brokers.
There are two primary rules from FINRA that financial advisors and brokers must follow in regards to investment:
- Suitability (FINRA Rule 2111)
- Know Your Customer (FINRA Rule 2090)
Suitability
Suitability ensures that brokers and their firms “must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile.” In other words, brokers must choose the right investments based on their client’s financial situation.
Know Your Customer
Know Your Customer, similar to the SEC’s Regulation Best Interest, makes it known that brokers have to have their client’s best interests in mind regarding investment decisions. All recommendations or suggestions for investment need to be suitable for the particular client and not serve the broker’s own personal interests.
Under FINRA Rule 2090, financial advisors and other professionals must obtain proper documentation and ask questions in order to know their clients well. A clear understanding of the client’s financial situation is required to make the best recommendations. All of these rules are set forth to protect investors from brokers who may be out for themselves or act without their client’s best interests in mind.
Examples of Common Broker Misconduct
Unfortunately, even with rules and laws set forth, broker misconduct can still occur. If you have been hurt by investment loss, hiring a stock market attorney can significantly help your case. In many instances, you have the right to recover compensation for your investment losses, especially when corrupt brokerage is involved. Some of the most common types of investment fraud are listed below.
Unsuitable Recommendations
Brokers must always make investment recommendations and decisions that are best for their clients. They have to operate under FINRA’s rules, which means they cannot make unsuitable recommendations to their clients. If your broker gave you unsuitable advice, you could benefit from compensation for your losses.
Lack of Diversification
Financial advisors and brokers need to ensure your investment holdings are appropriate for you, just like they have to recommend the best investment options for your personalized financial needs. In addition, financial professionals know that their clients shouldn’t have all their stock in one investment. Diversifying your portfolio is required; if you have suffered from investment fraud due to a lack of diversification, you should talk with a stock market attorney today.
Selling Away
When a financial advisor offers securities that are not overseen or approved by their member firm, it’s called selling away. This practice can put investors at risk and eventually lead to losses. A business lawyer with stock market knowledge can help you navigate any cases related to selling away and subsequent investment losses.
Inadequate Supervision
Brokerage firms have to take responsibility for the actions of their representatives. Any brokerage firm that does not correctly oversee their brokers can be held liable for failure to supervise, especially when investment loss happens on their watch.
Unauthorized Trading
When brokers or financial advisors engage in unauthorized trading, you should not be held responsible for losses, especially those you never approved of in the first place. Unauthorized trading is another common type of investment fraud that can lead to lawsuits and legal cases.
Excessive Trading
Excessive trading, or churning, is when a broker makes an inappropriate amount of trades on a client’s account. It can result in colossal investment losses for the client while raking in illegitimate commissions and fees for the broker. For this reason, clients can earn compensation when investment loss happens as a result of excessive trading.
Ponzi Schemes
Chances are, you’ve heard of some of the famous Ponzi schemes that have gone down in recent years. Ponzi schemes are one of the more complicated forms of investment fraud. Money is shuffled from new to old investors, and innocent people often lose a lot of money. Eventually, the scheme crashes, and clients will need help getting payback for their loss.
How a Stock Market Attorney Can Help
It’s best to act quickly in cases of investment loss. Finding a stock market attorney who can help you navigate the process is essential to regaining lost funds due to investment fraud. In some cases, there are time limits to pursuing claims, meaning you may not be able to make a case if the period has passed.
If you’re able to make a case before your claims are barred, an experienced business lawyer can help determine if you have a case and the best course of action to pursue it. Depending on the situation, arbitration might be more effective than court proceedings.
Just like you would hire a lawyer to help with a lease-purchase agreement, seeking legal counsel when faced with investment fraud is a wise decision that will help you in the long run.
Dealing With Investment Loss
Losing money on investments is never a pleasant experience. It’s made even worse when investment fraud is involved. Whether you’re dealing with unauthorized trading, harmful recommendations, or a Ponzi scheme, a stock market attorney can help you recover your losses.
Financial advisors and brokers must adhere to set rules and regulations regarding their clients’ investments. When these rules are broken, experienced business lawyers can take legal action to get your money back.