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Common Examples of Stock Broker Fraud and Misconduct

April 14, 2015 Blog

Stock fraud takes many forms and is not always easy to identify. However, as a general rule, if you have suffered a loss of a substantial portion of your portfolio, it is time to start asking questions. With a properly-managed account, large losses should only occur in the rarest of circumstances.  Exceptionally-poor performance and questionable activity usually suggest that your broker does not have your best interests in mind.

Practices That Violate Stock Brokers’ Obligations to Their Clients

An attorney who practices in the areas of securities fraud and stock broker misconduct will be able to help you determine if you have a claim against your broker. As an investor, these are the warning signs that suggest it might be time to talk to a lawyer:

  • Overconcentration and unreasonable risk (unsuitable investments). Your broker is obligated to provide advice and make investments that align with your investment strategy and risk profile. There are also general best practices that need to be followed to prevent portfolios from becoming overexposed. Significant losses due to overconcentration in a particular product or industry often suggest broker misconduct. Similarly, if your broker purchased risky tech stocks when your risk profile called for safe and reliable investments, you may have a claim as well.
  • Unauthorized trades. Your broker should not be making trades on your behalf without your explicit consent. If you have not authorized your broker to exercise discretion and have not specifically discussed the investment decision in question, your broker is not authorized to make the trade.
  • Account churning. Churning is the practice of engaging in an excessive number of trades in order to generate commissions. Brokers will often try to justify churning with the promise of quick returns, but the reality is that they are making the trades in order to bank profits for themselves.
  • Misrepresentations and omissions. If you made an investment decision relying on false information supplied by your broker or because a broker failed to disclose material information, the broker can be held liable for your losses.
  • Selling unregistered securities. With only certain limited exceptions, securities that are offered for sale to the public must be registered with the Securities and Exchange Commission (SEC). Perhaps for obvious reasons, unregistered securities are often significantly more risky than their registered counterparts. Sale of unregistered securities amounts to fraud and is a violation of federal law.

Experienced Stock Fraud Attorneys are Prepared to Represent You, the Victim

Zamansky LLC represents individuals who have lost a significant portion of their savings or retirement due to stock broker fraud or misconduct. We have helped numerous victims recover for their stock market losses. To speak with an experienced attorney about your case, please contact us today.

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“Throughout my entire case, Jake Zamansky was incredibly responsive and spent time walking me through each step of the process. He is professional and worked with my challenging schedule, even meeting with me nights and on weekends. He knew exactly which turn to take when it came to my case and yet was respectful of any decisions I wanted to make resulting in a positive outcome.”

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