Whether you are the victim of a
"respected" Wall Street brokerage firm or a "boiler room operation," you and
your attorney must prove that you have suffered an economic loss as the
result of recognized misconduct by your stockbroker, investment advisor or
financial planner. You must also prove that you behaved "reasonably" under
Most investor claims result
from the following types of misconduct.
Misrepresentation: This can involve either blatant lies or convenient
"omissions." For example, a broker might claim that he knows the future price
of a stock, that his firm controls the stock's price, or that he has inside
information. A misleading omission would occur when a broker tells you that a
company owns billions of barrels of proven oil reserves without mentioning
that the reserves cannot be recovered economically.
Excessive Trading or "Churning": This occurs when a broker who has
discretionary authority or practical ("de facto") control over an account
engages in excessive trading to generate larger commissions.
Unauthorized Trades: Here, the broker may fail to consult the client
before making trades in a non-discretionary account, buy stock on margin
without authority, or ignore specific instructions by the client regarding a
Failure to Follow Investor Instructions: This behavior often occurs among
"boiler room brokers," and can result in large losses if the stock price
collapses. In these cases, the broker usually tries to convince the investor
to retain a stock that he/she wants to sell, or simply ignores instructions
Misappropriation: Misuse of an investor's funds is often accompanied by
the broker's failure to report the transaction to his employer. Regardless of
the firm's knowledge (or lack thereof) regarding its employee's activities,
the company is liable for the misappropriation of the investor's money.
Unsuitable Investments: This occurs when a broker or financial planner
recommends inappropriate investments in light of the client's economic
circumstances or financial objectives. Example: a financial planner who
recommends that his client (a retiree in need of regular investment income)
put his/her money into high-risk stocks or mutual funds. Some clients have lost their life's savings due to broker misconduct. Others have had their pension fund or 401(k) placed into investments where the maturity time is too long. For example some clients are placed into equity indexed annuities that mature beyond their expected life expectancy.
In the absence of proven misconduct, arbitrators are unlikely to reward
investors who are eager to keep profits when an investment strategy is
profitable, but who demand reimbursement when losses mount. Broker abuse does
not automatically absolve the investor from having to act responsibly to stem
losses. Nearly half of all claimants do not recover any losses from
arbitration. Of the plaintiffs who do recover, most receive only partial
compensation. In addition, you may not be able to recover your full loss if
arbitrators determine that delays in bringing the claim resulted in
additional losses. For these reasons, it's best to have a knowledgeable
attorney on your side.
Do I have a Retirement Account lawsuit?