Stockbroker fraud is a broad term. Fraud embraces a wide range of conduct by brokerages and their registered representatives. This may involve lies, failure to investigate investments (called “failure of due diligence”), unsuitability or pure theft from a brokerage account. A few common types of stockbroker fraud:
- Churning: Churning occurs when a broker has control of an account and trades excessively for the purpose of generating commissions, usually dissipating the account with the intended purpose of creating income for the broker.
- Unauthorized trading claims: A broker must have authority to make a trade unless he/she is granted discretion.
- Unsuitability: This is the most common violation and happens when a broker recommends an investment that is not appropriate based on the customers’ investment objectives, and related facts unique to the investor. This can include unsuitable strategies for trading and making money. Excessive “margin” (borrowing money as against the securities account), can also be “unsuitable” and be actionable.
- Breach of fiduciary duty: This generally revolves around when a financial professional puts their interests ahead of the interests of their client, there is a direct conflict of interest or otherwise recklessly mismanages an account.
- Omissions or misrepresentation: this occurs when a brokerage or registered representative lies concerning an investment or does not disclose material facts to an investor. This may be a breach of fiduciary duty.
If you have a dispute with a brokerage (e.g., churning, misrepresentation, failure to follow your instructions or purchasing unsuitable investments), you can file a demand for FINRA (Financial Industry Regulatory Authority) for arbitration. In either situation, it is strongly recommended to work with an attorney experienced with the FINRA arbitration process.
When you are the victim of stockbroker fraud, FINRA also has published an “Investment Fraud Victim Recovery Checklist.” The Checklist states in part:
First: get in touch with an experienced attorney. We can help at Anthony M. Abraham, Esq., PC, Toll Free: 1-877-430-4877, Email: Anthony@AbrahamAttorneys.com.
Second: Create an investment fraud file. Start by collecting all relevant documentation concerning the fraud in one file that's kept in a secure location. This includes all statements from your broker, all opening account forms and any correspondence you may have received. Also, it is advisable to create a written timeline of events.
Third: Know your rights. Federal and, in some cases, state law give rights to victims of crime. Learn about your rights to better protect yourself. The U.S. Department of Justice (DOJ) provides information on victim rights and financial fraud.Report Fraud to Regulators
- U.S. Securities and Exchange Commission: (800) SEC-0330 or file a complaint.
- FINRA: (844) 57-HELPS or file a tip.
- North American Securities Administrators Association: (202) 737-0900 or www.nasaa.org.
- National Association of Insurance Commissioners: report fraud or file a complaint to your state Commissioner.
- National Futures Association: (312) 781-1467 or file a complaint.
- U.S. Commodity Futures Trading Commission: (866) 366-2382 or file a tip or complaint.
- Internet Crime Complaint Center (a partnership between the FBI and the National White Collar Crime Center): www.ic3.gov.
If you have been damaged as a result of stockbroker fraud, Anthony M. Abraham, Esq., PC may be able to help you recover your losses. We have helped many investors recover losses in stickbroker fraud cases. If you wish to discuss your claim with an experienced attorneys, call Anthony M. Abraham, Esq. at (877) 430-4877 or email Anthony@AbrahamAttorneys.com.