Stock Broker Misconduct

Stock Broker Misconduct


We trust stock brokers with our financial futures. We rely on their expertise to help us make wise investment decisions and save for retirement. Unfortunately, the truth is that some stock brokers are primarily interested in making money for themselves and the Wall Street firms they work for. Unlike what you see in their glossy commercials, your interests will always take a back seat to those of the investment houses. The following are a few examples of common types of broker misconduct:

Recommending Unsuitable Investments
Most claims against stock brokers are based on suitability arguments. Just because an investment is a terrific idea for one investor does not mean that it suitable for every investor. A working 38-year old investment banker with no children likely has a different risk tolerance than a 70-year old retiree that draws from his retirement savings. It’s the stock broker’s duty to understand the client’s needs and make suitable investment choices. If your broker is investing your money in investments that do not suit your financial profile, risk tolerance or investment goals, the broker is always responsible for your losses.

Excessive Trading or “Churning”
Most brokers make a living off the commissions they earn when you buy or sell a security. In other words, the more a stock broker buys and sells stocks, the more money he can pocket for himself. This creates a perverse incentive that leads some stock brokers to “churn” accounts by quickly buying and selling stocks in succession. If a stock broker is trading on your account solely for the purpose of maximizing commissions, that is a serious fraud.

Unauthorized Trading
Brokers must get permission to trade stocks. A broker cannot buy a security that you did not authorize. Remember, stock brokers make their money on commissions and they are incentivized to both buy and sell securities on your behalf. If your broker is trading without your consent, he is liable for the losses that result.

Concentration
Don’t put all your eggs in the same basket. The saying applies with force in the investing world. Most retail investors benefit from a diversified portfolio. A stockbroker who puts all your eggs in one basket, for example, low-cap technology stocks, is asking for trouble. Stock brokers who put all their client’s money in energy stocks are at the mercy of the fluctuating price of oil. A stock broker who fails to diversify his clients’ investments can be held liable for losses.

Deadline to File
All stock broker misconduct cases are subject to legal deadlines, and statutes of limitations. Consult with an experienced securities attorney at the Meyerson Law Firm today to find out about filing your claim.