Brokers and brokerages have specific duties and obligations to those people who entrust their money, often their life savings, to them. The Brokerages have specific and detailed obligations to supervise individual brokers working for them. These brokerages have a duty to review every trade that is submitted by their broker employees. If an investment account shows a pattern of excessive or unsuitable trading, complaints, misappropriation or unauthorized trading, the brokerage has an obligation to investigate the broker and his activities. Brokerages that fail to investigate or allow these actions to occur can be held responsible and liable for losses.

 

Brokers have fiduciary responsibilities to their investors. Brokers owe their investors a high degree of loyalty and are in positions of trust and confidence. Brokers have duties to inform their clients of transaction and investment risks. When they are disloyal and betray that trust and confidence, they can be held liable for damages. If a broker misrepresents or fails to provide information regarding an investment or transaction, you may have a potential claim against that broker to recover your losses.

 

There are many claims that can be brought by investors against their brokers, brokerage houses, retirement plan sponsors, financial planners, fund managers, investment advisors. The most common claims include:

• Churning - excessive trading in an account to generate commissions;

• Failure to execute or follow instructions from the investor with respect to his investments;

• Margin complaints - such as liquidating securities without giving the investor prior notice, prior to a deadline or after failure to meet a margin call;

• Misappropriation - misappropriating investor funds;

• Misrepresentations and omissions - intentionally or recklessly misleading or failing to disclose material facts regarding an investment.

• Negligence - broker failing to exercise due diligence and/or failing to act as a reasonable and prudent broker would act;

• Unauthorized trading of investments - in a non-discretionary account, a broker must be given permission to trade. Protect your rights -the investor should make a written complaint to the broker and brokerage of any such unauthorized trade as soon as discovered;

• Unsuitability of recommendations or investments - brokers are required to determine the suitability of an investment based on an evaluation of the investor/customer's investment experience, risk aversion and other factors.

Each of these claims must be evaluated on a case by case basis. In most circumstances, each of these claims is decided in an arbitration by an arbitrator(s) who then decides liability and damages if any. If you have lost money from investments and believe your broker committed any of the above acts, contact us for a free evaluation.