Areas of Specialization
Zamansky & Associates has extensive legal experience in a wide range of financial instruments, ranging from basic equities to esoteric derivatives. Some of the more common cases we have pursued include:
Stock Broker Fraud and Unsuitable Investments
An investment advisor has a fiduciary responsibility to appropriately manage a client’s portfolio in strict accordance with a client’s risk tolerance as outlined when a brokerage account is opened. Accordingly, a client whose stated investment goal is “preservation of capital” should not hold speculative or extremely volatile stocks. Similarly, clients with a stated need for liquid investments shouldn’t have been encouraged to buy auction rate securities, which many brokerage firms marketed as “cash equivalents.”
Investors who find themselves holdings investments not consistent with their stated investment goals quite likely have a legitimate arbitration claims.
Unauthorized Trades
Unless they have been granted discretionary authorization to buy and sell securities as they see fit, brokers need preauthorized permission before executing any trades in their client’s portfolio. Any trading activity not specifically authorized in advance by a client may be deemed an unauthorized trade and possibly merit an arbitration claim.
Risk Profile Change
In recent years we have seen a dramatic increase in incidents where stockbrokers have altered the risk profile of their clients and then recommended investments based on the amended risk profile.
Account Churning
A broker may not excessively buy and sell securities in a client’s account to generate commissions. Zamansky & Associates has considerable experience identifying so-called account churning and successfully recovered loss for this practice.
Fraudulent Statements and Omissions
Brokers are required to disclose a myriad of issues including the amount of risk that is associated with an investment as well as conflicts of interests and other material facts. These disclosures must be presented and fully accurate.
Over-Concentration/Failure-to-Diversify
Similar to marking unsuitable investments, a broker or investment advisor has a fiduciary responsibility to spread investment risks across industry sectors and securities. For example, a mix of stocks, bonds, cash and liquid instruments is usually recommended. Failure to effectively diversify a client’s portfolio can lead to significant losses. Investors can recover those losses via arbitration and the broker can face negligence and malpractice liability.
Excessive Use of Leverage and Margin
Brokers are responsible for determining the financial wherewithal of clients to repay investment loans used to buy securities, so-called buying on margin. Clients who were inappropriately encouraged to buy securities on margin may have a legitimate arbitration claim.
Activity Letters
Wall Street firms send “activity letters” to clients to alert them to high levels of losses, trading, margin and commissions. If you receive an activity letter from your brokerage firms and the level of activity does not match what you believe your broker was authorized to transact, you should immediately contact a securities attorney to review the situation.
Mutual Fund Frauds
The mutual fund industry has come under close regulatory scrutiny and investors have filed successful claims against brokers for a variety of reasons. Claims have included accusations that brokers switched from fund to fund in order to generate commissions as well as frauds involving the purchase of Class A versus B shares of a mutual fund. Investors have also filed claims related to undisclosed commission agreements paid to brokers by mutual fund companies. Through arbitration, many investors were able to recover losses based on these claims.