What Is Stockbroker Fraud?
No one should have to suffer investment loss due to a broker’s misconduct. However, the truth is that many people are the victims of stockbroker fraud every day.
While some investors may know they were victims of stockbroker fraud, others may just have a bad feeling about a recent investment after realizing that they suffered an investment loss.
Regardless of which category you find yourself in, you need a knowledgeable stockbroker fraud attorney to determine if stockbroker fraud occurred, identify how your stockbroker or the brokerage firm acted inappropriately, and develop a strategy to recover your investment.
Signs of Stockbroker Fraud
Stockbroker fraud is difficult to spot, but a lawyer can monitor your investment accounts and see the telltale signs of broker misconduct so you know if you should take action against a broker or brokerage firm.
Key things to look out for include:
Unauthorized Transactions
Imagine you check your investment account and notice some trades or sales you don’t remember approving. This could indicate unauthorized transactions, which means someone has made moves with your money without asking you first.
In the investment world, brokers must get your okay before making any trades. Keep a close eye on your account and speak up if you see anything that doesn’t seem right.
Money Loss When Similar Investments Have Profited
In the investing world, if you’re losing money on investments that are similar to ones that are making money for others, it could indicate a warning sign. It might mean your investments weren’t chosen well for you, or it could mean unfair play involved. Ask a stockbroker fraud lawyer about why this is happening and what you can do about it.
When is an Investment Recommendation Not Right for You?
Your stockbroker should help you pick investments that fit your financial situation, how much risk you can handle, and your goals. If they suggest something that doesn’t match up with these things, they may have committed stockbroker fraud.
What Does Putting Too Much into One Investment Mean?
You’ve probably heard, “Don’t put all your eggs in one basket.” This is important in investing, too. If all your money is in one type of investment, and it does poorly, you could lose a lot of money.
A good stockbroker helps spread your investments around to reduce risk. If your stockbroker doesn’t do this, they may have committed fraud.
What if a Stockbroker Makes Trades Without Your Approval?
Your stockbroker should always get your permission before making a trade with your money. If they don’t, it might count as fraud.
What if You’re Not Told the Whole Truth About an Investment?
Your stockbroker must tell you the truth about any investment, including the risks. If they leave out important details or give you misleading information, you’re not able to make a good decision. This dishonesty is a type of stockbroker fraud.
Can a Stockbroker Use Your Money for Their Own Purposes?
The most clear-cut fraud is when a stockbroker takes your money for their own use rather than investing it. Whether they’re using your investment funds for their own bills or taking money directly from your account, it’s theft and a serious breach of trust.
What’s the Problem With Too Much Trading?
Stockbrokers usually earn money through commissions on trades. Some might make a lot of trades in your account to earn more commissions, even if it’s not in your best interest. This is known as churning. It can hurt your investments while benefiting the stockbroker.
How Do You Prove Stockbroker Fraud?
Proving fraud means your stockbroker harmed you on purpose, causing financial loss. It could be as simple as theft or as tricky as deceitful advice that led to your loss.
Is Going to Court Always an Option?
Not always. Many agreements with stockbrokers include a clause that requires any disputes to be settled through arbitration instead of court. This means a neutral third party will hear your case and make a decision. This can be quicker and less expensive than going to court.
What is FINRA Arbitration?
FINRA stands for Financial Industry Regulatory Authority. Its arbitration process is a way to resolve disputes between investors and stockbrokers without a traditional court trial.
It involves:
- Filing a claim
- Choosing an arbitrator
- Attending a hearing, much like a less formal version of court
