Securities Law

Failure to Execute Securities Orders

Your broker is allowed “a reasonable time” to execute your securities orders. However, if you asked your broker to sell a stock or if you had a stop loss order or something similar, and your broker failed to execute it in a timely manner, and the stock you were attempting to sell lost significant value during the delay, you might have a claim against your broker for failure to execute.

Breach of Fiduciary Duty

Securities brokers and investment advisors are fiduciaries that owe their customers a duty of loyalty and care. A broker or investment advisor, as an agent of the customer, stands in a special relationship of trust, confidence and responsibility, with certain obligations to his customer. Because of his position as a licensed professional, investment advisors and securities brokers hold themselves out as being trained, experienced, and able to render specialized service. The level of loyalty and care owed depends on the type of accounts held by the investors or the relationship between the parties. In a discretionary account the broker can manage the customer’s portfolio without obtaining explicit customer approval for each individual transaction. On the other hand, for a non-discretionary account the broker is required to get customer approval before making trades, to research every recommendation, to make full and complete disclosures, and to place an order in a timely manner.

Brokers and investment advisors have several obligations. First, a broker or investment advisor must manage accounts in a manner directly in line with the needs and objectives of the customer. Investment advisors must keep abreast of changes in the market, which could affect his customer’s interest, and they must act responsively and sensibly to protect those interests. Investment advisors have an obligation to keep his client up to date on each completed transaction. Finally, brokers and investment advisors must explain the impact and potential risks of the recommended trading strategy.

Since investors are expected to place their trust in their stockbroker or investment advisor whom they rely upon for expertise in making the investment decisions, they are held to an extremely high standard regarding their duties of loyalty and care and must conduct themselves with the utmost good faith and integrity.

If you believe your financial advisor breached his or her fiduciary duty to you, and this breach resulted in losses in your account, contact us for a comprehensive and confidential investment advisor fraud evaluation with no obligation.

Churning and Unauthorized Stock Trade

Your stockbroker is never authorized to trade on your behalf without your fully informed approval. Unauthorized trading violates industry regulations and can be the basis for a claim against the broker and the stockbroker’s firm.

Churning occurs when your broker convinces you to make multiple trades in a commission account that is not intended for your best interest. Recommendations to buy and sell securities or investment products are typically designed to benefit the stockbroker by generating more commissions at your expense. Churning is a fraudulent scheme designed to generate more commissions. Good disciplined trading with stop losses and profit taking can lead to an increased volume in trading. But if you did not have this discussion prior to an increased volume in trading, then you may be victim of churning.

Unsuitable Securities Claims

Stockbrokers must be licensed by FINRA (the Financial Industry Regulatory Authority). Consequently, they are subject to FINRA’s rules. One of the fundamental rules imposed by FINRA is that stockbrokers are required to make appropriate or suitable recommendations to their customers based on their tolerance for risk and investment objectives. “Suitability” is determined by your income, net worth, age, investment objectives, risk tolerance and other factors.

Your stockbroker may also violate the suitability rule by failing to properly diversify your investment portfolio or by concentrating too much of your portfolio in volatile, or risky securities. The recommendation and sale of unsuitable investments constitutes securities fraud and if it caused a financial loss, may be the basis for a securities fraud claim.

Fraud Claims

Being in the securities business as well, Mains Law Office is very aware of the consequences a complaint can have on a Financial Advisor’s reputation, licensing, and record. Come talk to our office to understand from an insider’s point of view what the consequences or implications result from a complaint. We will share our insight and help to determine if you have a legitimate argument with respect to your investment loss.

Types of Securities Claims

Stockbrokers, registered investment advisers and financial planners are required to deal with their clients with the utmost integrity. They are not permitted to place their own interests ahead of their clients. This duty is called a fiduciary duty because they are in a position of trust. If the stockbroker or investment adviser breaches that fiduciary duty and causes you injury, you may have a stock fraud claim and may be able to recover damages for any losses caused by the stockbroker’s misconduct.

The federal and state securities laws protect investors from material misstatements of fact as well as the failure to disclose a material fact in connection with the purchase or sale of securities. Since securities are defined very broadly, these laws may apply to many different financial instruments. In addition to misstatements and omissions in connection with the purchase or sale of a security, there are a number of other types of securities fraud claims. We’ll cover a few of them below.

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