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When Stock Losses are Unusually High, It May Be Time to Consult with a Stock Broker Fraud Lawyer

While almost everyone who invests in the stock market is likely to encounter losses from time to time, investors need to be aware of potential stock broker fraud and misconduct. The stock market is currently at an all-time high and many forecasters are predicting steep market declines in the upcoming year. Every stock broker fraud lawyer at our firm is far too familiar with cases of stock broker fraud and misconduct that often take place in a volatile market.

Investors seek out the advice of brokerage and investment firms with the expectation that their brokers will act in their best interests with the goal of maximizing their portfolio returns. When a stock broker engages in misconduct, including fraud, negligence, unauthorized trading or any other type of deceptive activity, both the broker and their brokerage firm may be held liable for the customer’s financial losses. Stock broker fraud and misconduct can have devastating results and each stock market loss lawyer at Zamansky LLC is committed to helping victims obtain the financial recoveries that they deserve.

The stockbroker fraud attorneys at Zamansky LLC can provide guidance to individuals who have experienced losses due to fraud, mismanagement of investment accounts, deceptive sales practices, and unsuitable financial advice. We take legal action against financial advisors, brokers, and other financial professionals on behalf of investors who have suffered significant investment losses. Far too many victims are unaware of their legal rights and the fact they may be able to recoup the money they have lost.

If your rights have been harmed on by the financial services industry, Call us at (212) 742-1414.

Breaking Down Stock Broker Fraud and Misconduct

Brokers have a duty to provide investment advice and recommendations that are in the best interest of their customers. As part of this duty, brokers are required to carefully analyze all trades and investments to determine whether such transactions are consistent with their customer’s investment goals, financial situation and ability to tolerate risk. If a broker makes a recommendation to invest in a particular stock or group of stocks that is not suitable for the investor and the investor incurs a financial loss, he or she may have a legitimate claim against the broker for making an unsuitable recommendation.

In addition to providing suitable investment advice, brokers are also required to obtain the explicit permission of their customers before making any trades in their accounts. When a broker makes a sale or purchase on behalf of a customer without the customer’s prior knowledge and authorization, the broker has engaged in improper and illegal unauthorized trading.

While there are limited circumstances when a broker is permitted to enter into a transaction without the customer’s prior authorization, this action generally requires the investor to sign a written form with the brokerage firm granting the advisor the authority to make trades without the investor’s explicit permission. The best way for investors to protect themselves against unauthorized trading is to carefully monitor their accounts and discuss each and every transaction with their investment advisors.

Stock broker fraud and misconduct can involve many types of improper and illegal activities. In some instances the broker may have made a mistake or an error in judgment. In other situations, the broker may have deliberately taken advantage of an investor or engaged in other types of fraudulent activity. In either case, investors who have suffered stock market losses due to broker fraud or negligence may have a legitimate claim against both their broker and the brokerage firm. Thus, it is critical to consult with a stock loss lawyer.

Warning Signs of Stockbroker Fraud

While there are plenty of warning signs of fraud, most investors don’t see the signs until it is too late. Unfortunately, even experienced investors miss signs that seem obvious in hindsight. This includes common warning signs of stockbroker fraud such as:

  • The account statements you receive from your stockbroker or investment advisor don’t match your own records about the principal you’ve invested, your historical returns or the fees you agreed to pay.
  • Your stockbroker or investment advisor has made unauthorized trades on your account. This could be one or more individual trades or a series of trades that generate commissions without generating returns.
  • Your portfolio is overconcentrated in a particular industry, type of investment or specific investment product.
  • Your stockbroker or investment advisor is earning substantial fees while you are suffering losses or barely breaking even. 

Taking Action Against Stock Market Losses with a Stock Broker Fraud Lawyer

Stock law firm, Zamansky LLC, handles all types of stock broker fraud and misconduct cases. Whether an investor’s loss is the result of broker negligence or a deliberately deceptive activity, every stock market loss lawyer at our firm is prepared to take action to help victims recover their financial losses. Our stock loss attorneys have extensive experience representing investors across the United States and abroad who have suffered serious stock market losses. We have an in-depth understanding of the financial services industry and know how to successfully prepare and pursue claims against “bad brokers.”

We handle all types of stock broker fraud cases, including:

If you believe that your stock market loss may be the result of stockbroker fraud or misconduct, contact a lawyer at Zamansky LLC today. Our stock broker fraud law firm offers free consultations and we have the experience and resources to help you recover your financial losses.

Our Stock Loss Lawyers Can Investigate Account Churning & Find the Liable Parties

“Churning” takes place when a broker engages in excessive buying and selling of securities in a client’s account in order to generate commissions for the broker.  Excessive trading that is inconsistent with the goals and financial position of the investor is evidence of churning.  Churning is not only unethical, it is illegal. Such conduct violates SEC Rule 15c1-7 and other securities laws.

Most individuals do not have the expertise to trade their own securities, so they employ a broker to buy and sell securities on their behalf.  Many investors give brokers the power to trade on their accounts and trust them to make trades that are in their best interest. When a broker churns the account, he or she has violated the client’s trust and breached the broker-client relationship. Thus, it’s time to consult with a stock broker fraud lawyer and hold the responsible parties liable.

Proving Churning

An experienced stockbroker fraud lawyer at Zamansky LLC can evaluate your claim to determine whether churning or excessive trading has occurred. To succeed in an account churning claim against a broker, the investor must prove the following elements:

  • The broker exercised control over the client’s account
  • The broker engaged in excessive trading
  • The broker acted with the intent to defraud or with disregard for the best interests of the client

Stock broker fraud in the form of churning is a complicated concept and can be difficult to establish. What may be considered a proper and acceptable level of trading in an account for a sophisticated, risk-taking investor may be deemed wrongful for a risk-averse retiree. Excessive trading is measured against the specific investment objectives of the particular investor.

The securities fraud attorneys at Zamansky LLC have decades of experience investigating and prosecuting churning claims against stock brokers. We know how to establish and prove that excessive buying and selling has taken place. Our stock loss attorneys will carefully scrutinize all trading activities, broker commissions and fees on your investment accounts.  If we determine that churning or excessive activity has occurred, we will aggressively pursue your claim against the broker and brokerage firm.  Our account churning attorneys will work to ensure that the broker is held accountable for the fraudulent actions and we will fight to recover any money that you may have lost as a result of the churning activities.

Our Stock Law Firm Breaks Down FINRA Arbitration and Mediation

FINRA shares responsibility with the U.S. Securities and Exchange Commission (SEC) for enforcing stockbrokers’ legal obligations. Under FINRA’s rules, stockbrokers are required to arbitrate disputes with their clients in most cases. If you have invested in the stock market through a broker, your brokerage agreement almost certainly includes a mandatory arbitration provision; and, if it does, this provision is binding on both you and your broker.  

Prior to proceeding with arbitration, FINRA’s rules also allow stockbrokers and their clients to agree to mediate. While it won’t always be in investors’ best interests to pursue mediation, this approach can prove beneficial in many cases. Generally speaking, agreeing to mediate does not result in a waiver of your right to pursue other options; so, if mediation is unsuccessful, you can still file for arbitration to secure a binding resolution.

Recovering Fraudulent Losses in Stockbroker Arbitration

Arbitration is the primary option for recovering investment losses due to stockbroker fraud. FINRA arbitration proceedings are governed by the Securities Industry Conference on Arbitration’s Uniform Code of Arbitration and FINRA’s rules. While arbitration is more structured than mediation (more on this below), it is much less structured and less time-consuming than litigating a securities fraud dispute in court.

Pursuing arbitration against your stockbroker begins with filing a Statement of Claim and Uniform Submission Agreement and paying the appropriate fee. Upon receiving notice of your Statement of Claim, your stockbroker has 45 days to respond. From this point forward, both parties’ rights and conduct will be governed by the Code of Arbitration and FINRA’s rules; and, unless you and your broker reach a settlement, the outcome of your claim will be determined by a panel of one to three arbitrators. The panel’s decision is binding—subject to a limited number of grounds for appeal.

FINRA arbitration offers a few key benefits for investors, including:

  • Simplified procedures, reduced costs. FINRA arbitration is a relatively streamlined process. With simplified procedures compared to litigation, the costs of pursuing a claim in arbitration can be significantly less than the costs of taking a case to trial.
  • Prompt resolution. The simplified procedures of FINRA arbitration also mean that investors can expect quicker results than those attainable in court.
  • Knowledgeable arbitrators. FINRA arbitrators are well-versed in the rules and laws that govern stockbrokers’ conduct. This allows them to efficiently arrive at informed decisions in most cases.

However, being forced to arbitrate a claim against your stockbroker can have certain drawbacks as well. Some of the main potential drawbacks of mandatory arbitration include:

  • Limited options. While arbitration is an efficient and cost-effective way to resolve most claims against stockbrokers, being forced to arbitrate limits your options.
  • Limited grounds for appeal. If you lose your case in arbitration, your grounds for filing an appeal will be limited.

Recovering Fraudulent Losses in Mediation with the Help of a Stock Broker Fraud Lawyer

Even if your brokerage contract includes a mandatory arbitration clause, you and your broker (or brokerage firm) can still agree to mediate your dispute. FINRA handles more than 1,000 mediated claims each year; and, while not all efforts at mediation result in a settlement without arbitration, many do.

Why might you and your stockbroker (or brokerage firm) agree to mediate your dispute? Under appropriate circumstances, mediation offers benefits to both parties. These benefits can include:

  • Time savings. If your stockbroker (or brokerage firm) is willing to mediate in good faith, then pursuing mediation can even further reduce the amount of time it takes to achieve a resolution.
  • Cost savings. Here too, saving time means saving money. Achieving a negotiated settlement through mediation avoids the additional costs of arbitration.
  • More options. In mediation, the parties have the flexibility to develop a mutually agreeable resolution. The mediator’s role is to help the parties explore their options rather than issuing an award in favor of one party or the other.
  • More control. Since a mediator does not make a binding decision, pursuing mediation allows disputing parties to retain complete control over the terms of their settlement. If the parties cannot agree, then they can terminate their efforts and move forward with arbitration.

There really aren’t any drawbacks to mediation. Even if mediation does not result in a settlement, it can help set the stage for arbitration. However, mediation will not make sense in all cases, and, if your broker (or brokerage firm) is not willing to mediate in good faith, then it can end up being a waste of time.

Should You Pursue Stockbroker Arbitration or Mediation?

Should you pursue stockbroker arbitration or mediation? If you believe that you are a victim of stockbroker fraud, you should discuss your options with an attorney. Arbitration and mediation may both be good options—and they may be your only options if your brokerage agreement includes a mandatory arbitration clause. At Zamansky LLC, our stock broker fraud attorneys will thoroughly evaluate your claim, we will communicate with your stockbroker’s (or brokerage firm’s) lawyers if mediation seems like it might be a good option, and we will help you make informed decisions about how to pursue recovery of your fraudulent investment losses.

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Be Sure to Use FINRA BrokerCheck After a Stock Market Loss

In order to avoid stock broker fraud schemes, investors would be wise to research the professional background of current and prospective brokers and brokerage firms. FINRA, the Financial Industry Regulatory Authority, has developed BrokerCheck, a free resource for investors. BrokerCheck allows investors to search for information about brokers, brokerage firms, investment adviser firms and representatives. Investors can also obtain online background reports when available.