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What is Stockbroker Negligence?

July 9, 2021 Blog

When you work with a stockbroker, you expect your broker to help you make informed decisions. You know there are no guarantees, but you are paying for the benefit of your broker’s expertise. So, what happens when your stockbroker provides bad advice (or puts his or her interests first)? Can you sue for negligence? Or, can you hire a stockbroker fraud lawyer to represent you in FINRA arbitration?

5 Common Examples of Stockbroker Negligence

Stockbroker negligence can take many forms; and, when individual investors lose money due to stockbroker negligence, they can file claims to recover their losses. This typically involves going to FINRA arbitration, though going to court will be necessary in some cases. Some common examples of stockbroker negligence include:

  • Failure to Diversify – Failure to diversify, also known as overconcentration, involves placing too much of an investor’s money in a particular industry or security. Diversification is essential to mitigating investment risk, and stockbrokers who fail to recommend adequate diversification can be held liable in many cases.
  • Failure to Perform Due Diligence – Stockbrokers have a responsibility to make suitable investment recommendations. When they fail to perform due diligence on the stocks they recommend, they can face liability for providing unsuitable investment advice.
  • Selling Fraudulent Securities – An egregious form of failing to perform due diligence involves selling fraudulent securities. Stockbrokers must take appropriate steps to ensure that they are selling their clients legitimate investments—not fake stocks or other high-risk “investments” that are fronts for fraudulent scams.
  • Account Churning – Account churning involves conducting a high volume of trades for the sole purpose of generating commissions. While account churning is prohibited under federal law, many stockbrokers still seek to take advantage of having control over their clients’ portfolios.
  • Breaching Their Fiduciary Duty – Account churning amounts to a breach of stock brokers’ fiduciary duties to their clients. Brokers can breach this duty in various other ways as well. Any time a broker puts his or her interests before those of his or her client, the client can potentially pursue a claim for negligence.

Seeking Just Compensation for Stockbroker Negligence

If you have suffered investment losses due to stockbroker negligence, you should speak with a lawyer right away. While you have clear legal rights, asserting these rights is not easy. Your broker may dispute your allegations, and you will need evidence to convince FINRA arbitrators (or a judge or jury) that you are entitled to recoup your investment losses from your broker. An experienced stockbroker fraud lawyer can pursue your claim on your behalf—and do everything that is necessary to make sure your broker is held accountable.

Talk to a Stockbroker Fraud Lawyer for Free

Are you a victim of stockbroker negligence? If so, the stockbroker fraud lawyers at Zamansky LLC can help you fight to recover your investment losses. To get started with a free, no-obligation consultation, call 212-742-1414 or request an appointment online now.