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Are You a Victim of Stock Broker Fraud?

September 11, 2015 Blog

Stock fraud is a broad term that can be used to describe many types of deceptive practices that unscrupulous brokers use to make money off of unsuspecting investors. When a broker misleads you or uses your account for his or her own personal gain, you may be entitled to recover losses that you suffer as a result.

Unfortunately, spotting fraud is not always easy and, when you do spot it, you will need to be able to prove it in order to win your case. What follows are some tips from our stock fraud attorneys for identifying fraudulent broker practices and protecting yourself when you realize something has gone wrong.

Signs of Stock Fraud

While unethical brokers tend to prey on casual investors, many of their schemes have become so sophisticated that experienced investors are now prone to falling victim as well. The Securities and Exchange Commission (SEC) has established regulations that require brokers to make certain disclosures and act with their clients’ best interests in mind.

However, many fraudsters (a) do not care about the rules and (b) can make it look like the rules are being followed even when they are not.

Still, there are certain warning signs that can tip investors off to many forms of possible stock fraud. These include:

• Your broker has disclosures on his or her BrokerCheck report. The Financial Industry Regulatory Authority (FINRA) maintains an online database, called BrokerCheck, which contains information about registered brokers. Disclosures indicate that a broker has received customer complaints, been subject to arbitration proceedings or regulatory actions, lost a job, filed for bankruptcy, or been subject to civil or criminal proceedings in court.
• Your broker has sold you unregistered securities. Unregistered securities tend to be extremely risky and are unsuitable for most casual investors.
• Your broker is making trade or investment decisions without your consent. If your broker is making trades or refusing to make trades contrary to your instructions, this too can be a sign of fraud. Churning – executing a high volume of trades in order to rack up commissions – is a form of fraudulent activity as well.
• Your broker is buying investments you do not understand. If your broker cannot adequately explain the investments he or she is buying, this may be a sign of fraud.
• You have experienced sudden and unexplained losses or withdrawals. If your broker is following a sound investment strategy, sudden and extreme losses should only occur under extraordinary circumstances. If you (and your broker) cannot explain what has happened to your money, this may be a sign that you are a victim of stock broker fraud.

What to Do if You have Experienced Stock Fraud

If you have any suspicion or indication that you may be a victim of fraud, you should take action right away. If you are working with a broker who is employed by an advisory firm, you should contact the firm to report the issue and freeze any further activity on your account.

You should also pull together copies of your statements and any other records you may have. This includes not only records relating to the fraudulent transactions, but also any other information from your account history that may show a pattern of fraud or a sudden deviation from your investment strategy. This information will be critical for helping prove that your broker is responsible for your losses.

Contact Zamansky LLC to Learn More

Our attorneys have decades of experience representing investors who have fallen victim to stock fraud. Located in New York City, we represent clients nationwide. To schedule a confidential consultation with one of our experienced attorneys about your case, call (212) 742-1414 or contact Zamansky LLC online today.