What to Do If Your Stockbroker Engaged in Misconduct

What to Do If Your Stockbroker Engaged in Misconduct

You trusted your stockbroker with your hard-earned money. It seemed like a great arrangement until it didn’t. Now, you’re worried your stockbroker is committing fraud with your investments. You’re not alone. In 2017, 66,873 securities fraud and theft cases were reported to the United States Sentencing Commission.

Danger Signs of Broker Misconduct

Some activities in an account may not be prudent for most investors and are a sign of possible broker wrongful conduct that requires closer attention. These include:

  • A significant change in the makeup of your portfolio
  • Pressure to act without delay on the purchase of an investment
  • A concentration of your portfolio into a single product
  • Large purchases of securities on margin
  • Switching between different mutual fund families or variable annuity contracts
  • Denied access to a branch manager or compliance officer
  • Account under-performance compared to the stock market
  • Guarantee of investment return and protection against losses

Types of Fraud

Most people know about investment frauds like Ponzi schemes from the news, TV, or movies. But your stockbroker can commit many types of fraud beyond the basic Ponzi scheme.

For example, there’s churning when a broker trades more than normal on a client’s behalf to generate commissions. Frequently buying and selling securities may indicate churning, which does little to benefit the client.

There’s also the “short and distort” scam, which is the inverse of a pump and dump scheme. In a “short and distort” scheme, investors short a stock and spread rumors to drive the price of that stock down.

If you spot any questionable transactions, research different types of investment scams and see if one rings true for your broker.

Don’t waste time if you think your broker is committing stock fraud. Read on to find out how to protect your money.

Contact the Brokerage Firm and Branch Manager

Before you do another thing, you need to contact your brokerage firm immediately. This is for two reasons:

  • So, you maximize the potential to recover any losses
  • So, make sure you have the complete picture

Of course, there’s always the chance that a questionable transaction only looks questionable until you have the complete picture, which is why you need to discuss it with your broker and brokerage firm immediately.

If you aren’t satisfied with the answers you receive, ask to speak to a branch manager. Regardless, any problems you notice should be addressed as soon as possible, as statutes of limitations apply to certain claims. Delays may prevent you from being legally able to bring a claim at all.

Know the Difference Between Losses and Fraud

For this reason, it’s essential to understand the difference between reasonable market losses and stockbroker fraud.

As any investor knows, the stock market fluctuates all the time. Because of this, it’s easier for shady brokers to pass off fraudulent investments as normal market losses.

The key is to show negligence by your broker.

When You Have a Legal Case After Stock Market Losses

So, how do you know if you have a legal case after market losses?

Look at the investments your broker has made.

For example, is your broker making investments that are unsuitable for you based on your risk preference, financial goals, and interests? Did they pressure you into an investment you didn’t want?

You may also have a case if your broker completed any trades you did not allow. You have complete discretionary authority, and the only time a broker can make a trade on your behalf is if you have given explicit permission, allowing them to do so.

In addition, you have a case if your broker omitted any information about a trade or misrepresented facts or figures that later resulted in a loss. Remember, you have discretionary authority, so if your broker is falsifying information to pressure you into a trade, they’re committing fraud.

Assemble the Right Documents

If you have spotted what seems to be stock frauds and you haven’t gotten any reasonable explanation from your broker, you need to start assembling your case as soon as you talk to the brokerage firm.

This begins by collecting evidence. In a stock fraud case, this means collecting the necessary documents that would prove fraud, which can include:

  • Notes of discussions with your broker
  • Copies of correspondence with your broker and their firm
  • Account statements
  • Confirmations of transactions
  • Any written materials your broker provided you
  • Any research material you received from your broker

If it seems relevant, put it together with the other documents, and keep any new documents that come in after you spot the fraud as well.

Speak With an Experienced Stock Loss Lawyer

From there, you need to take all of those documents to an attorney who is an experienced stock loss lawyer.

Investors who believe they are victims of stockbroker misconduct are often persuaded to recoup their investment deficits from the brokerage firm without proper counsel.

Brokerage companies often argue that there was no misconduct. And, when a firm proposes a financial settlement to settle a dispute, the offer most often falls far short of the investor’s losses.

Contacting the SEC and FINRA is of little or no benefit to investors. These organizations handle policing securities markets but do not help investors recover investment losses.

If you believe you are a victim of stockbroker misconduct, seek the advice of a lawyer with expertise in securities arbitration and litigation.

Keep the Case Between You and Your Lawyer

Once you work with a lawyer, you’ll need to do several things to help your lawyer keep the case on track.

Attorney-client privilege doesn’t just exist to protect you. It exists to help your lawyer do a better job of protecting you. One of the most vital is keeping the case details between you and your attorney.

Remember the phrase, “Anything you say can and will be used against you in a court of law…”? That applies here. Let your attorney do the talking for you.

Are You the Victim of Stock Frauds?

If you are the victim of stock fraud, you’re going through a frightening time. You thought your money was secure, only to find that someone with all of your financial details has misused your money on the stock market.

You should consult a lawyer with expertise in securities arbitration and litigation if you suspect that you have been the victim of stockbroker misconduct. Consultations of this nature are most often free and will help you determine whether you have a claim to recover your investment losses.

Don’t waste time. You need a lawyer that will fight to get your money back.

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