Can You Trust Your Wall Street Investment Advisory Firm?

While many cases of investor fraud involve scam artists and independent advisors who start their own “wealth management” firms so that they can take advantage of unsuspecting investors, a large percentage of cases also involve the major Wall Street firms. This comes as a surprise to many investors. Many investors choose the big names because they believe that these firms hold their investment advisors to a certain standard of accountability; and, while this may generally be true, we routinely see cases in which investors have lost money due to glaring oversights at some of the biggest investment advisory firms in the country.

J.P. Morgan Filed $1.25 Million for Failing to Adequately Protect Investors

As a recent example, the Financial Industry Regulatory Authority (FINRA) recently fined J.P. Morgan $1.25 million for a shortcoming that exposed investors for more than eight years. According to FINRA, J.P. Morgan failed to adequately screen approximately 8,600 of its employees, “preventing the firm from determining whether those persons might be disqualified from working at the firm [as a result of] felony convictions or for disciplinary actions by financial regulators.” Although FINRA’s News Release does not state whether any investors were actually harmed, this type of incident demonstrates just how easy it is for investors to unknowingly put their entire life’s savings at risk.

Investment Fraud Risks with Major Advisory Firms

So, as an individual investor, what can you do? Before you choose an advisory firm, it is important to conduct as much research as possible. You can see if your individual broker or advisor is registered with FINRA or the Securities and Exchange Commission (SEC), and you can check FINRA’s and the SEC’s websites for other news releases like the one we summarized above:

• FINRA’s Newsroom
• SEC Investor Alerts and Bulletins

Along with taking these steps (among others) before choosing an investment advisory firm, individual investors should routinely monitor their accounts for potential warning signs of fraud. This includes account activity such as:

• An unusually-large number of trades (which may be evidence of “churning”)
• Trades you did not authorize
• Trades you do not understand
• Sudden and unexpected losses across your portfolio (which is often a sign of lack of diversification)
• Purchase of investments that do not reflect your financial circumstances and risk profile

Fortunately, all major investment advisory firms and their advisors are subject to mandatory FINRA arbitration for claims submitted by individual investors. If you are concerned about fraudulent investment losses, you should speak with a stock fraud lawyer about filing a claim with FINRA. The FINRA arbitration process is simpler and less time-consuming than going to court, and it provides an opportunity to recover any losses that are not the result of ordinary market factors.

Speak With an Investment Fraud Lawyer at Zamansky LLC

If you would like more information about filing for arbitration with FINRA, we encourage you to contact us for a complimentary consultation. To speak with one of our experienced attorneys in confidence, please call (646) 663-5628 or inquire online today.