Stock Broker Fraud and other Investment Losses

Investors who lose money as the result of careless mistakes or intentional fraud by their stock brokers or financial advisers may be eligible to recover their losses through a process known as stockbroker arbitration. Stock broker fraud and other unethical acts on the part of a stockbroker are a violation of the stockbroker's duties to his clients.

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Stock Broker Violations

Some types of claims that may result in financial awards to investors include:

Churning of account: Churning is excessive trading of an investor's account in order to generate broker commissions. Essentially, the stockbroker makes unnecessary—or even harmful—trades on an account to generate more commissions for himself.
Suitability violations: These claims arise from recommendations by a stockbroker or "financial advisor" that result in losses in your account from investments that were not appropriate for your risk tolerance, overall financial situation or investment objectives. Suitability claims frequently involve recommendations by stockbrokers to invest all of an investor's money in stocks, to borrow money from the brokerage on margin or to invest heavily in a single stock or mutual fund or a small group of stocks. They may also involve an investor's money being put in a risky investment when the investor's portfolio, age or financial situation makes the risky investment unsuitable.
Negligence: A stockbroker has a duty to manage accounts and carry out customer instructions with reasonable care. Investors may have claims for recovery where stockbrokers, "financial advisers" or brokerage firms do not exercise reasonable care.
Options "Exercise and Hold" /Failure to Diversify:During the height of the technology stock market boom ending in 2000-2001, many stockbrokers advised employees who held substantial amounts of options on employer stock to exercise the options by borrowing money from the brokerage, and to then hold the stock for at least one year to qualify for long-term capital gains treatment. This strategy was in most instances very unwise because it exposed the investor to the possible loss of a substantial portion of his or her net worth in the event that the company's stock share price fell. Additionally, many brokers overlooked or failed to recommend strategies known as "zero cost collars" and "variable prepaid forward contracts" to investors whose investments in employer stock could have been safeguarded via utilization of these strategies. Many investors suffered substantial losses because of brokers' poor advice to "exercise and hold" and/or failure to recommend diversification and/or appropriate hedging strategies.

Stock Broker Arbitration Claims

Arbitration claims can involve all types of investments, including stocks, bonds, annuities, and mutual funds.

Most customer claims against stockbrokers and financial "advisers" or "consultants" are required to be brought in arbitration before the Financial Industry Regulatory Authority (FINRA) rather than in court. The cases take about one year to complete and are decided at a hearing before either one or three arbitrators, depending on the size of the claim. The arbitrators are people who are knowledgeable in securities industry disputes.

An arbitration award is final and binding, meaning that there is no drawn out appeals process before the investor receives his or her award, if an award is handed out. Hearings are held throughout the United States.

Stock Loss Legal Help

If you have suffered stock losses as a result of stock broker negligence such as listed above, please click on the link below to send your complaint to a stock lawyer who will evaluate your case at no charge.

Please click here for a free evaluation of your Stock Broker case

Last updated on May-15-12

STOCK BROKER ARTICLES AND INTERVIEWS

Bizarre Tales of Stock Broker Fraud

Columbus, OH: Stock broker fraud can leave one shaking one's head—in view of the arrogance and cruelty of some perpetrators in taking advantage of other people and their money, together with the tragedy when innocent people are needlessly fleeced and financially scarred.
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Stockbroker Arbitration Results in $1.5 Million Award

Dallas, TX: A stockbroker arbitration has resulted in a $1.5 million award to the claimant. This case of stockbroker fraud allegedly involved the sale of unsuitable limited partnerships to the claimant. Stockbroker arbitration—filed in cases of stockbroker investment fraud—is usually mandatory in cases where an investor has a complaint against a stockbroker.

A [READ MORE]

Stock Broker Fraud Case Nets $1.375 Million

Incline Village, NV: A stock broker arbitration case has returned a jilted investor his entire lost investment, plus interest. The case surrounded the placement of a sizeable investment into a high-risk product when the investor instructed his broker not to do so [READ MORE]