West Palm Beach Stock Broker Fraud Lawyer
On the one hand, your stock broker is a financial professional, but on the other hand, a stock broker is a commissioned sales person who earns a living by buying and selling securities and investment products. The majority of brokers are competent and ethical, but while the profession offers plenty of opportunities to make an excellent living perpetuating schemes and defrauding clients of potentially large amounts of money.
Stock broker fraud is a serious crime that can cause the perpetrator to lose his license, be forced to reimburse your losses, and even spend years in jail.
Just because you’ve lost money in the stock market does not necessarily mean you’ve been defrauded. Investments come with risks. Even well-established corporations have ups and downs in the value of their stock, often reflecting the conditions in the overall economy, sometimes because of occurrences that reduce investor confidence, or in some cases, poor management. And some brokers give bad advice with no intent to defraud. However, if you have lost money because your broker has misrepresented a certain investment or deliberately mismanaged your account in various ways designed to generate excessive commissions, enticed you to make blatantly poor investments, or bought and sold stocks without your authorization and to your detriment, it may be time to consult an experienced securities attorney.
A Stockbroker’s Duty to Clients
Different people have different investment needs. When you open a brokerage account, your stock broker has an obligation to learn who you are, what your financial goals are, and how much risk you are able to tolerate. No one should have all their money in extremely high risk investments, but if you have a lot of money, you might want to allocate some part of it to riskier investments with the potential for a higher return—as long as you can afford the loss if the stock should tank, and you have other solid investments or cash to back it up.
But if you are an older person, no longer working, but living on a retirement income, you will want to ensure that you have enough money to last you through the remainder of your life, knowing that if you lose too much money in risky investments, you may have no means to recover it, and could end up facing an impoverished retirement. Your broker should never make any recommendations or purchase any stocks on your behalf without first determining your unique situation and understanding your goals and needs. Failing to do so could constitute broker fraud.
Types of Stock Broker Fraud
There are as many fraudulent schemes as there are greedy and unethical brokers, with new ones popping up all the time. These are some of the types of broker fraud that occur most often:
- Misrepresenting the facts to mislead you into making inappropriate investments, or withholding important information that you would need to make an informed decision on an investment. This could mean not disclosing information about: the company being recommended, the sales commission the broker would be earning, risks involved in the investment, liquidity of the investment, and so forth.
- Pushing you into investments not suited to your means or situation in life. If you are a widow living on a fixed income with limited funds and your broker pushes you into investing in a portfolio of all high-risk stocks, this might indicate fraud.
- Overconcentration of your stock portfolio in one type of investment, one company’s stock, one industry, one market sector, or one type of security, as opposed to limiting risk by diversifying your investments.
- Unauthorized trading, or making trades on your account without your express permission.
- Churning your account, which is making frequent transactions or quick trades in and out of a stock in hopes of generating quick profits while generating multiple commissions for the broker. A broker makes a commission when he performs a transaction on your account; the greater the number of trades, the greater the broker’s commissions. This can be an incentive to make unnecessary trades to drive up commissions, with little or no benefit to you, or in many cases, to your detriment. This is easier for a broker to do if you have granted the authority to trade at his or her discretion, so you need to monitor discretionary brokerage accounts especially closely.
- Failing to execute your order in a timely manner is unethical and can cost you. It is improper for a broker to accept your order and then delay its execution.
- Depositing client funds in the broker’s own account.
- Selling non-existent securities.
- Selling away – selling you an investment unknown to the brokerage firm and outside its regulatory review.
- Unregistered brokerage activity. All stock brokers and investment or financial advisors are required to be licensed to sell specific classes of investment products. Anyone holding himself out to be a broker without the proper license to sell a particular investment, whether he has never had one or has lost his license for misconduct, is guilty of fraud.
- Targeting seniors for inappropriate or unsafe investments, especially fraudulent annuities, often representing themselves as “senior specialists,” a meaningless designation to attract older people as a marketing ploy.
Getting the Legal Help You Need When You’ve Been Defrauded
If your brokerage account has taken a nosedive and you don’t know why, or if you are seeing activity that appears to be questionable, you may have cause to believe that there is some illegal activity going on. Your best course of action is to consult an experienced securities attorney. You may be able to recover all or part of the money you have lost, especially if you can show that you were not told the risks involved in a particular investment, you could not afford the risk, that the investments the broker made were not consistent with your stated investment goals, or that the broker mislead you or engaged in some illegal practice.
To learn whether your broker has violated the law or handled your account in an unethical manner, attorney Todd A. Zuckerbrod, P.A. has 29+ years of experience in the securities industry. Arrange your free consultation to discuss your situation by calling his Boca Raton office today.