If you have suffered investment losses or any kind of damages based on the recommendations of brokerage firms or a financial advisor, you should speak to an investment fraud lawyer.
Anyone that helps you to make investment decisions has a responsibility to clients to ensure that the guidance they give and the results they achieve were carried out to the best of their knowledge. While no financial advisor can predict the future, and every investor is aware that the value of their investment portfolio can go down as well as up, any potential losses should be governed by the markets.
However, the markets are not the only consideration. Most financial advisors will create a strategy designed to work for new investors and their experienced counterparts alike, accounting for their goals and risk tolerance. If your losses can be traced back to fraud, mismanagement or negligence on the part of your advisors, you may have legal grounds to recover those losses.
Challenging a finance professional in court can be a daunting prospect. However, with the right support from an experienced and knowledgeable investment fraud lawyer, you can compile a compelling case with an excellent chance of success.
Speak To An Investment Fraud Lawyer from Zamansky LLC Today
You wouldn’t hire a mortgage consultant to work on your investment portfolio, so you should never hire a lawyer with no experience in the securities industry. With a presence in the heart of Wall Street, and also in Miami, the investment fraud lawyers of Zamansky LLC have both relevant expertise and extensive experience working with clients to recover lost money that was a result of financial advisor misconduct, involvement in a Ponzi scheme or any other form of investment fraud.
When you call our law offices, you can expect a free, confidential, and no-obligation discussion of your individual circumstances. We appreciate that no two cases are the same, and will work closely with you to ensure everyone involved has all the facts to support a winning case.
The interests of our law firm will align closely with your own as we typically operate on either a success or contingency fee basis. That means that we will work tirelessly to put together a successful case, and our investment fraud attorneys are always open, honest, and realistic about potential outcomes when we represent investors.
The Zamansky LLC team is standing by now to discuss your case. Call us today at 212-742-1414 to discuss your options.
What Is Investment Fraud?
Investment fraud, also known as securities fraud and stock fraud, is an illegal practice in the commodities and stock markets that typically encourages investors to make decisions around buying or selling assets on the basis of false information.
It is a broad term and also extends not only to misleading investors but also to outright theft by a financial advisor or other trusted financial professional. Certain forms of financial embezzlement, manipulating stocks, and the publication of misleading statements to stockholders all fall under the investment fraud umbrella.
Common Broker Misconduct Cases
Broker misconduct occurs when a brokerage firm or financial advisor commits one of a number of crimes. Typically, these crimes fall into the categories of deceit and theft. However, there are several specific crimes that your investment fraud attorney will boast vast experience in and can support you throughout your legal action.
These crimes can be blamed on both malicious and non-malicious circumstances. Some brokerage firms and financial advisors breach financial regulations due to greed, while others commit the same crimes but through incompetence or negligence.
What each of these brokerage firm misconduct cases has in common is that individuals that lose money as a result typically need to actively pursue their broker or financial advisor to recover those losses. Investment losses caused by the illegal actions of a third party give the victim the right to recovery, and our team will help you ensure you’re well-placed to do just that.
A financial advisor has a professional obligation to get to know their client and understand their circumstances. Just as every legal case involving investment fraud is different, there is no textbook approach to assisting someone with shrewd investments and planning for their financial future.
While a brokerage firm does not need to know your life story, it should always endeavor to be clear on your investment objectives and risk tolerance. A registered investment advisor should not, for example, encourage someone close to retirement to invest a pension into a highly volatile stock.
If financial advisors do not take steps to understand your investment goals, they may be considered negligent in the eyes of a state and federal court. If they fully understand your investment goals but intentionally make recommendations that do not align with them and compromise your financial security as a result, they may have committed securities fraud.
Breach of Fiduciary Duty
An investment advisor is a fiduciary to their clients. That means that they have a legal responsibility to act in their best interests. If they make decisions or recommendations based on anything else, such as direct personal gain or higher commissions, an advisor may be in breach of his or her fiduciary duty.
Even if you have not suffered investment losses as a result of their advice, if they made recommendations in the knowledge that there were better opportunities available, they may again be in breach of fiduciary duty.
As the name suggests, churning involves an unnecessarily high number of transactions. If an investment firm or financial advisor recommends frequent buying and selling of assets, they may be doing so in pursuit of greater commissions rather than as part of a financially robust strategy.
A stock broker, especially one that represents investors on behalf of smaller and perhaps regional brokerage firms, may have the time and inclination to micromanage a client’s investment accounts. As such, they may be constantly on the lookout for new opportunities and make investment recommendations as such.
However, if they receive a commission for each transaction and suggest excessive trading, they may be liable for a securities fraud lawsuit. The best approach is to speak to an investment fraud lawyer from our law firm, who will confidentially review your accounts to investigate whether securities laws have been breached.
Unauthorized trading is relatively self-explanatory. Many financial advisors and brokers will seek permission before executing any trades on a client’s behalf. Investment firms that make financial decisions without consulting clients, particularly when they have suffered losses as a result, may have committed broker fraud.
Not all trades carried out on behalf of a client qualify as unauthorized trading. It is possible to give investment advisors an ongoing trading authorization, which can be similar to a specific power of attorney related to investment decisions. Such authorizations mean that they can buy and sell assets on your behalf without the need to seek permission for each individual trade.
If you are unsure whether trading has taken place on your account without your knowledge, whether or not any financial losses occurred, it is vital to speak to an experienced securities fraud lawyer from one of the leading law firms as quickly as possible. The sooner you speak to them, the sooner they can begin investigating your accounts and gathering the critical evidence that can make or break investment fraud cases.
As most reputable financial advisors will tell their clients, diversification is a critical component of just about every successful financial strategy. In order to meet your investment objectives, it is important to have some kind of balance so that when unexpected bad news arrives, it does not have a crippling impact on your financial position.
Most broker-dealers will advise on a mix of asset classes tailored to the goals and budgets of individual investors. If a financial advisor recommends investing substantial portions of your total net worth into relatively few securities or a single market sector, they may be in breach of their fiduciary duty by ignoring your risk tolerance.
It is not always clear, especially to new investors, whether over-concentration has taken place, but if there are repercussions in your portfolio, an investment loss attorney can analyze your accounts to determine whether stockbroker fraud has taken place.
Switching is similar to churning in that broker-dealers may initiate more trades than necessary, potentially resulting in lost money for their clients. However, it applies specifically to financial instruments such as:
- Mutual funds
- Bond funds
- Real estate investment trusts
Many investors find that major financial institutions offer similar products. For example, mutual funds are designed to achieve returns on behalf of numerous investors through a combination of assets in line with stated investment goals. If a fund manager identifies a strong growth opportunity with robust fundamentals, they are unlikely to be the only one to do so. After all, word travels famously fast on Wall Street.
If a brokerage firm advises clients to switch from their current mutual funds into others from a different institution while the underlying assets in each remain noticeably similar, they may have given this advice in pursuit of the commissions paid for selling a new product.
That, again, is in breach of their fiduciary duty to their clients unless they genuinely believe that the alternative product stands a significantly greater chance of success. Doing this in pursuit of personal gain rather than in their client’s best interests is clear investment abuse and something in which an experienced securities lawyer would be particularly interested.
Purchasing securities and other assets on margin can be particularly risky for inexperienced investors. It involves essentially borrowing money from a brokerage firm to increase your purchasing power through leverage.
It can be an attractive proposition for investors as it magnifies their potential gains. In addition to their own contribution to a securities purchase, they benefit from the proceeds of the leveraged amount.
However, as expected in the stock market, it works both ways. Just as margin can increase your gains, it can also magnify investment losses. In cases of particularly significant losses, a brokerage firm may initiate a margin call, giving them the right to sell even high-performing assets to cover margin obligations.
Investment advisors that negligently or fraudulently recommend purchasing on margin are not only in breach of fiduciary duty but will likely have committed securities fraud. Bigger purchases, even when enabled through leverage, typically result in higher commissions in the securities industry. If that can be legally determined to have been the driving factor behind their recommendation, investors should speak to an investment fraud attorney without delay.
Types of Securities Fraud
Beyond the potential breaches of securities laws faced by investors, there are additional, broad categories of securities fraud that may require the involvement of investment fraud lawyers to resolve.
Corporate fraud covers cases of investment fraud but often within powerful organizations. Some of the most famous examples involve corporate misconduct, whereby influential individuals in large businesses elect to break the law to protect their employer. For example, they may wish to cover up previous illicit activity by doing so, or attract or retain investors by overstating the performance and growth prospects of the brand to attract or retain investors.
Corporate fraud also includes the creation of dummy corporations. This is rarely a gray area in the context of securities fraud, as fraudsters intentionally create new companies with similar names to existing ones with the sole purpose of selling shares using the reputation and goodwill of an entirely different organization.
Given their positions within a company, senior executives are also among the most likely beneficiaries of insider trading. While the term is not unique to corporate fraud, it is often those that make critical decisions and those close to them that are likely to gain actionable information before the wider markets.
While the internet has made trading and investment more accessible than ever, it has also given rise to a new class of potential securities fraud.
Instant, global communication platforms have increased the risk of pump-and-dump schemes, whereby a number of investors collude to artificially inflate the price of an asset before cashing out in a manner whereby only earlier investors succeed financially.
The fact that anyone can position themselves as an expert on any subject has also increased the likelihood of scalping, whereby someone in a position of influence can recommend an asset to their audience, having previously acquired it at a lower price prior to their intended influx of buyers.
Abusive Short Selling
Short selling is a viable investment strategy for those that understand the implications. However, it is not for novice investors. For buyers, they can operate in the knowledge that even if the company in which they have invested goes bankrupt, the most they can lose is the value of their initial investment.
Short sellers take on the risk of potentially infinite losses as every uptick in the value of an asset means a loss for them. Nevertheless, the practice is entirely legal when carried out according to market regulations, and it represents one of the best ways to speculate on a company or asset losing value.
However, short selling is open to abuse. Done legally, the investor borrows the asset, sells it, and then buys it back when the price falls. The asset is then returned to the lender, along with an agreed borrowing fee, with the short seller keeping the difference.
Potential abusive short selling might involve naked short selling, whereby an individual or institution sells a share without having borrowed it. Alternatively, it may involve a practice known as short and distort, where an investor takes a short position in a company and then uses their influence to spread malicious and often false rumors about the business. Those rumors cause investors to sell and the price to fall, effectively enabling the short seller to profit from fictional news.
It is also vital to remember that short selling, even when done legally, can impact an asset’s price. Given that the share is loaned between two parties, no buy order exists. However, as far as the markets are concerned, the asset is sold, which has the same impact on the price as a genuine sale.
The actions of certain individuals throughout history have made Ponzi schemes one of the most widely-known examples of securities fraud, even among non-investors. The schemes work by attracting investors and demonstrating returns that catch the eye of even the most cautious individuals. However, while the operators of a Ponzi scheme will publicly maintain that the proceeds stem from legitimate business activities, withdrawals are instead funded from the influx of additional investment.
Those that withdraw early are the primary beneficiaries. When new investments begin to slow, and the scheme has no legitimate means of financial recovery, those that retain exposure to the scheme stand to lose their investment as it unravels.
The Role of the Financial Industry Regulatory Authority (FINRA)
The Financial Industry Regulatory Authority (FINRA) is responsible for regulating its members that participate in the financial services industry. Unlike the Securities and Exchange Commission (SEC), which is an independent federal agency, FINRA is a private corporation and a self-regulatory organization (SRO).
While the SEC is the highest level of regulation in US markets, including responsibility for regulating FINRA itself, most individuals that consult investment fraud attorneys with the intention of filing a securities fraud lawsuit will interact with the Financial Industry Regulatory Authority at some point in proceedings.
This is primarily due to the fact that FINRA regulates the vast majority of trading of equities, bonds, futures, and bonds. Any firm that deals with securities in the US, including financial advisors, broker-dealers, and investment firms, are obliged to become FINRA members unless they hold membership of an alternative SRO. As the most prominent of the securities regulators in the US, FINRA has a responsibility to protect investors by ensuring that members participate in the markets on the correct side of the law.
Any investor involved in a dispute with a FINRA member is entitled to attempt securities arbitration. An arbitration claim may involve a brokerage or, in the case of specific broker misconduct, the individual. If you do elect to pursue arbitration, you are still entitled to utilize the services of securities fraud lawyers, and it is highly advisable to do so. An investment loss attorney will ensure that your rights are always respected throughout the arbitration process, and they can help to ensure that you have access to evidence and legal expertise when making your case during negotiations.
Prior to pursuing an arbitration claim, your attorney will also advise on the best course of action. When you appoint an investment fraud attorney from our law firm to handle securities arbitration, you can rely on our extensive experience with FINRA to ensure that you always retain a strong position when you have suffered losses.
What You Can Expect From Our Investment Fraud Lawyers
When you appoint an investment fraud attorney from Zamansky, you can be confident of outstanding legal support and guidance from a highly qualified and experienced professional.
If you have suffered losses as a result of broker misconduct or a breach of fiduciary duty by financial advisors, you can expect the highest standards of service from someone that is just as enthusiastic about your case as you are due to the fact that we typically operate on a contingency fee basis. We will cast an informed eye over your accounts and any correspondence to discover all relevant evidence to support investment loss recovery. We will also provide constant support and regular updates on your case, whether you decide to pursue your claim in court or prefer an alternative resolution.
Overall, you can expect full support from your investment fraud lawyer, accompanied by genuine transparency with advice and recommendations given to support your best interests.
Your Free Consultation
Investment fraud is a complicated legal topic, and no two cases are ever entirely the same. The initial free consultation enables our securities fraud attorneys to understand your circumstances and provide insight into what to expect from your case based on relevant cases from the past. These free consultations are carried out in complete confidence and with no obligation. Combined with our typical preference to work with clients either on a success fee or contingency fee basis, we give prospective clients a realistic outlook on their case and an overview of the most likely outcomes. This also means that if you are unsure about the merits of your case or you require legal context applied to your investment losses, you can speak to an expert to gain a greater understanding of your situation.
Frequently Asked Questions
Can I Sue for Investment Fraud?
If you suffered financial losses in your investments due to greed, negligence or incompetence, you may have a case to sue for investment fraud. Not all cases end up in court, and you may prefer arbitration over litigation, depending on the nature and scale of the offenses. Given that no two securities fraud cases are ever identical, it is best to speak to qualified securities fraud attorneys about your options. They can support you in seeking justice and will also ensure you understand all possible options and the most likely outcomes.
How Do You Prove Investment Fraud?
It can be difficult and time-consuming to prove investment fraud, especially when the nature of using the services of brokers and financial advisors implicitly requires a level of trust in an expert to do their job. Typically, the financial professionals involved will begin to arouse your suspicions through their actions. Some of the most common potential signs of securities fraud include:
- The failure of contracted financial professionals to return phone calls
- Unfamiliar transactions on account statements
- An investment portfolio that is stagnant or losing money in an otherwise buoyant market
- Your broker seemingly alters their overall strategy without consulting you first
If you have any suspicions, it is vital to start gathering evidence. Initially, that can mean retaining account statements, correspondence, and other documentation that might support your case. It is often best to consult an investment fraud attorney at the earliest possible opportunity, as they can be pivotal in the evidence-gathering phase. They can use their experience of past cases to provide insight into precisely what to look for and can work on compiling a dossier of documentation that can potentially remain relevant all the way through to the court process. To prove investment fraud, the claimant must provide evidence that a financial professional was reckless or negligent in their duties to the client. There must also be evidence that the claimant’s reliance on the services provided caused them loss or damages.
Is Investment Fraud a Crime?
Fraud is one of the most prevalent financial crimes, and investment fraud is considered a crime. Depending on the nature of the case, it can result in both criminal and civil penalties. Both individuals and organizations can commit investment fraud, and when a crime is proven, it can result not only in financial penalties but also in license suspensions and imprisonment.
Additionally, the same investment fraud case may be tried not only at the state level but also at the federal level if in breach of the relevant laws.
What Type of Crime is Investment Fraud?
Investment fraud is a type of crime in its own right, although it can also be classified as white-collar crime. Such crimes are nonviolent and are typically carried out in an effort to gain or avoid losing assets, influence, or status. Like most crimes, investment fraud can result in a range of penalties at the county, state, and federal levels depending on the severity of the deception and the losses sustained by one or more individuals as a result.
Speak to Our Securities Fraud Attorneys With a Free Consultation
It is never too early or too late to seek legal advice if you believe you have been a victim of investment fraud. No matter your experience level as an investor, warning signs may become increasingly apparent, and you have the right to question the conduct of anyone appointed to operate in your best interests. What you may not be able to do alone is to apply a legal context to your suspicions, which is where the investment fraud attorneys of Zamansky LLC come in. Located in the heart of Wall Street and with offices in Miami, we boast extensive experience in a broad range of investment fraud cases.
Our lawyers have worked closely with FINRA and the Securities and Exchange Commission in various capacities. We know what it takes to put together a successful case and invite all prospective clients to call us to discuss their options. Our team is standing by now to help you gain clarity and move forward in pursuit of recovering investment losses caused by someone you trusted to look after your best financial interests.
Call the team at Zamansky LLC today at to discover precisely how we can help.