Churning
Stockbrokers are usually compensated each time they conduct a transaction for a client. The more transactions a broker makes for a client, the more commission they earn. This compensation structure is flawed because it often encourages dishonest brokers to execute as many trades as possible in their client’s accounts. When a stockbroker puts his or her own interests ahead of the interests of the customer by effecting trades that are "excessive in light of the objectives and resources of the customer's account," the broker is churning the account.
Unsuitable Advice
Investors have different objectives and risk tolerances. What might be a prudent investment for one investor might be entirely unsuitable for another. Stockbrokers and investment advisors have a responsibility to know their customers’ financial situation and objectives and refrain from giving investment advice that is too risky or unsuitable.
Unauthorized Trades
Under most circumstances, stockbrokers and investment advisors are required to have authorization from a client to purchase or sell securities in client accounts. The exception is if you specifically give your broker or advisor written authority for discretionary trading in your account. Unless, you gave your broker discretionary authorization, any purchases made in your account without your knowledge or permission is a clear violation. If you lose money as a result of such an unauthorized trade, you have a claim against the stockbroker and his firm for the loss.
Failure to Diversify
Investors should be diversified among asset classes, meaning they should own stocks, bonds, fixed income products and cash. This type of diversification helps cushion an account from severe swings in both directions. Investors should also diversify the sectors in which they invest. This helps protect investors in case one particular industry suffers from some unforeseen setback.
Other examples of Stockbroker Fraud
Conflict Of Interest
Failure to Supervise
Omission of Facts
Registration Violations
Misrepresentation
Exploitation and Abuse of the Elderly
Ineptitude Or Malpractice
Breach of Fiduciary Duty
Misrepresentations/ Omissions
Seek Legal Help Quickly
If you have been the victim of stockbroker fraud in your investment account it is important to seek legal help immediately. Any hesitation in filing a complaint and seeking legal help may be viewed negatively by arbitration panels and courts.
Free Unauthorized Trades Legal Consultation
Contact Mark & Associates, P.C. today to have your stockbroker fraud case evaluated for free by an experienced stockbroker fraud securities lawyer. Please complete the case evaluation form on the right side of this page or call 1-866-50-RIGHTS (1-866-507-4448) to have your case reviewed.