They are calling the latest coronavirus stock market fiasco the Black Monday Meltdown. For some, it should be called the Bad Broker Bungle.
The March 9 trading day had barely begun when an automatic 15-minute halt in trading occurred after losses reached 7 percent. By the end of the day, the Dow had dropped 7.8 percent — over 2,000 points — its worst one-day percentage slide since 2008. The S&P 500 fell 7.6 percent, also its biggest one-day decline since 2008. And the Nasdaq dropped 7.3 percent.
Monday’s chilling stock market collapse left investment advisors and brokerage houses scrambling to explain to clients how recent stock market volatility is an unanticipated consequence of the new coronavirus pandemic. Nobody’s fault really.
But not all investors are buying it. Nor should they.
Yes, There Was a Coronavirus Stock Market Panic
The March 9 selloff was sparked by Saudi Arabia’s decision to slash crude prices, causing world oil prices to crash. There is no doubt that coronavirus fears fueled the flames of panic
Uncertainties about how fast the coronavirus would spread or how deadly it would become has been giving everyone the jitters.
Businesses that depend on cross-border trading and the travel and leisure industry are already suffering the effects of the coronavirus pandemic, and other businesses, dependent on confident consumers, are starting to feel the pinch. News that the number of people worldwide infected with COVID-19 has risen well past the 100,000 mark is creating even more reason for concern.
It’s not a stretch to conclude that investor fear over the impact of the new coronavirus — and the volatility of the stock market — is not letting up any time soon. In fact, according to the VIX Volatility Index, market volatility has been reaching record levels for weeks.
When the market plummets like it did on Monday, it is easy to conclude that all losses were due to coronavirus pandemic fears, that they were out of anyone’s control. But dig a little deeper and it turns out that, in many instances, broker misconduct was really to blame for an individual investor’s losses.
Not All Stock Market 2020 Losses Link to Pandemic Fears: Your Broker May Be to Blame
The question investors need to be asking themselves is this: Should I have owned that stock or been in that fund in the first place?
The answer could very well be “no.” Investors are manipulated by brokers and financial investors all the time. Some common types of broker misconduct include:
- The broker recommends unsuitable investments that fail to take into account the investor’s risk tolerance or whether they are in a position to incur loss. A prime example of this is when a broker encourages a client to purchase oil, gas and energy stocks that turn out to be much more speculative than originally promised.
- The broker buys or sells securities without the client’s permission. Engaging in unauthorized trading is a breach of fiduciary duty.
- The broker fails to recommend that the client diversify investments. This type of over-concentration puts the client at unreasonable risk.
- The broker talks the client into Yield Enhancement Strategy investments without making them aware of just how risky YES and other types of iron condor investments can be, and how prone they are to losses in a volatile market.
What to Do If You Think Broker Misconduct is Behind Your Stock Market Crash 2020 Losses
If you are an investor who has suffered a loss during the recent coronavirus stock market panic and suspect that your broker may be to blame, contact our law firm today for a free consultation about how you might be eligible for recovery.