SECURITIES & COMMODITIES LITIGATION
|
How can I tell if I have been the victim of Stock Broker Fraud?
If
you have experienced losses in your savings or investments due to one
of the following typical forms of stock broker fraud or misconduct, you
have a right to file a claim and you may receive an award of all or a
portion of your losses:
|
Unsuitability
When a
Registered Representative makes an investment recommendation to an
investor, that recommendation must be suitable to that investor's
needs. Determining suitability is not an exact science. However, it can
be achieved by analyzing many different factors unique to that
particular investor. Factors such as age, investment experience, time
horizon, employment status, net worth, risk tolerance, and others
combine to give the Representative a picture of what investments are
suitable to that particular investor. When losses occur because
recommendations are made without having obtained this necessary
information, or if the recommendations are not suitable from an
objective standpoint, investors have the right to file a claim to
attempt to recover their losses from the unsuitable investments.
|
Failure to Diversify
Overconcentration
in a single stock, industry or sector can lead to increased volatility
(fluctuation) in the investor's portfolio. Failing to diversify this
over concentrated position can also increase the amount of risk that
the particular portfolio is exposed to in contrast to a properly
allocated portfolio. It is crucial that the Representative properly
diversify the investments so as to minimize the overall risk of the
portfolio.
|
Churning
In hindsight, this
is perhaps the most obvious form of abuse among Registered
Representatives, although not always apparent while it is occurring.
When Representatives buy and sell investments on behalf of a client in
a brokerage account, typically they receive a commission for executing
these transactions. If the amount of the transactions are unreasonable
or unsuitable for that particular investor's account, the presumption
arises that the Representative made these trades in order to generate a
commission, not for the investor's best interest. This self-dealing may
or may not be obvious while it is occurring, but looking at the
commissions charged over a 6-12 month period of time can reveal
evidence of its occurrence.
|
Unauthorized Trading
Put
simply, Registered Representatives are not authorized to make trades in
an investor's account prior to obtaining that investor's approval with
respect to each and every individual purchase or sale of securities in
that account. If the Representative has not contacted the investor
prior to placing a trade, does not have discretion to make trades in
the account, or did not receive instructions directly from the investor
on an unsolicited basis, that Representative may be liable for
Unauthorized Trading.
|
Misrepresentations and Omissions
When
a Representative intentionally gives an investor misleading information
regarding that investor's stocks, bonds or other securities, that
Representative is liable for losses in the account caused by that
misrepresentation or omission. Examples of this type of fraud include
guarantees regarding stock or mutual fund performance, failure to
accurately disclose an individual security's risk, failing to disclose
commissions generated or fees charged, etc.
|
Failure to Supervise
It is
management's responsibility to supervise each and every Representative
and each and every investment account. In order to keep track of the
many customers and multitude of accounts that a typical Representative
oversees, management must have compliance and oversight procedures in
place. Failure of management to generate, follow or enforce these
procedures will cause management to be responsible for the losses in
addition to the individual Representative. While multiple recoveries
are not awarded, a panel of arbitrators will consider the role of
management in preventing the losses in the first place, and will hold
management liable for failing to supervise the account.
|
|