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10 Reasons Why You May Be Entitled to Recover Your Investment Losses

December 24, 2020 Blog

When you invest in the stock market, you know there is a possibility that you could lose your principal. But, you expect any losses to result from market factors, not from fraud. Unfortunately, fraud is a very real concern for individual investors; and, in many cases, investors can seek to recover their losses with the help of a securities fraud attorney.

Can a Securities Fraud Attorney Help You Recover Your Investment Losses?

Securities fraud can take many different forms, and it can be perpetrated by many different parties. Investment advisors, brokers, brokerage firms, public and private companies, hedge funds, and scam artists can all engage in fraudulent practices that put individual investors’ portfolios at risk.

If you have concerns about investment fraud, can a securities fraud attorney help you? You may be entitled to recover your investment losses if:

1. Your Investment Advisor Provided Unsuitable Recommendations

When recommending potential investments to their clients, investment advisors have an obligation to provide “suitable” investment recommendations. This means that the recommendations they provide must take into account individual investors’ specific financial circumstances and risk tolerances. If you lost money in an investment that was not well-suited to your portfolio, overall financial condition and/or investment objectives, you could have a claim for an unsuitable investment recommendation.

2. Your Investment Advisor Failed to Adequately Diversify Your Portfolio

Part of providing suitable investment advice involves ensuring that investors’ portfolios are adequately diversified. Diversification is a fundamental tenet of cautious investing, and investment advisors have a duty to ensure that they are not “overconcentrating” their clients’ portfolios in a particular asset or asset class. If you suffered substantial losses when a particular stock or a segment of the market crashed, you could have a claim for failure to diversify.

3. Your Investment Advisor Made Unauthorized Trades

Unless you specifically give your investment advisor “discretion” or “trading authorization,” your investment advisor is only permitted to make trades on your account with your approval. Even if your advisor thought he or she was acting in your best interests, if he or she made an unauthorized trade that resulted in a loss, you may be able to file an investment fraud claim based on the unauthorized trade.

4. Your Broker Failed to Act in Your Best Interests

As of June 30, 2020, brokers have a duty to act in their customers’ best interests. Many investors are surprised to learn that this has not always been the case; but, previously, brokers were permitted to act in their own best interests due to their classification as salespeople rather than fiduciary advisors. One of the biggest changes implemented by the SEC’s Regulation Best Interest (Reg BI) is that brokers must now affirmatively disclose any conflicts of interest to their customers. If your broker failed to disclose a conflict (or otherwise failed to act in your best interests), you could have a claim for fraud.

5. Your Investment Advisor or Broker Made Trades Solely in Order to Generate Fees

While investment advisors and brokers are entitled to earn a reasonable fee when they perform services for their clients, they are not permitted to make recommendations or execute trades solely for the purpose of generating a fee. This is known as “account churning,” and it is a recognized form of investment fraud. If you see an unusually high number of trades in your account, if your broker’s or advisor’s fees are eating into your returns, or if multiple trades in your account have resulted in losses, this could potentially support a claim for recovery in FINRA arbitration.

6. Your Investment Advisor or Broker Provided Inaccurate or Incomplete Information about an Investment

When discussing investment options, investment advisors and brokers have an obligation to provide investors with complete and accurate information. In other words, they cannot choose to only discuss the return potential while ignoring the risks that an investment entails. If you were misled into purchasing a risky investment, you may have a claim against your advisor or broker for investment fraud.

7. A Company or Fund Published False or Misleading Information

In addition to investment advisors and brokers, companies and funds can publish false and misleading information as well. If you purchased or held onto a stock based on a company’s fraudulent disclosures, or if you invested in a fund that provided you with falsified or misleading financial data, you may have grounds to pursue an individual claim for investment fraud, or potentially join a securities class action lawsuit.

8. You Relied on False or Misleading Information Published on Social Media

The risk of relying on false or misleading information published on social media is becoming an increasing concern for individual investors. As an investor, it is important to do your research; and, in today’s world, this could mean looking for information on Twitter, Facebook, and other social media platforms. However, there have been several recent cases of investors suffering losses as the result of relying on false information spread through social media, and these cases can also give rise to claims for investment fraud.

9. You Invested in an Unregistered Securities Offering

Unregistered securities offerings are another issue of growing concern for individual investors. The registration process is designed to ensure that investors have access to the information they need in order to make informed decisions, and all securities must be registered unless they fall within a specific exception. Selling unregistered securities is a form of investment fraud that can lead to claims against the companies that make these offerings as well as against brokers and advisors who recommend them.

10. You Are a Victim of an Investment Fraud Scam

Finally, in addition to being wary of fraudulent conduct by investment advisors, brokers and securities issuers, individual investors also need to be cognizant of the risk of falling victim to investment scams. If you have lost money in an investment scam, it will be important for you to consult with a securities fraud attorney as soon as possible.

Request a Free Consultation with a Securities Fraud Attorney at Zamansky LLC

Are you entitled to recover your investment losses? Our securities fraud attorneys can tell you. To schedule a free and confidential consultation at Zamansky LLC, call 212-742-1414 or contact us online now.