Examples Of Investment Broker MisconductBy Angelica Malin
What Does an Investment Broker Do?
When you decide to invest in the stock market, you will hire an investment broker to seek your best financial interests. This investment broker must be a person you strongly trust to handle your money in the best possible way. You put complete trust in this broker to make the best possible financial decisions to make your money work for you. You hire a broker because you must be licensed and skilled in the industry to buy and sell a stock.
If you have an impressive investment portfolio, you must hire an investment broker who works as a fiduciary. This professional must act in your best interests. This professional does not work for any commissions.
- An investment broker is an excellent connection between you and the market when you want to make a winning investment.
- An investment broker works between buyers and sellers of the stock market.
- An investment broker assists their clients in making the best decisions for buying stocks and bonds from exchanges.
An investment broker is a professional who uses your funds to make money on these transactions made on your behalf. Generally, the investment broker you hire works for well-known investment firms.
These larger investment firms act as the transaction agents for you. The primary service of these firms is buying and selling investments.
You may also opt for a broker-reseller. This person acts on your behalf with a more prominent broker. Most of these professionals have had an extensive education in finances and banking experience that enables them to give you individualized and personalized investment advice, including setting up a retirement plan.
The investment broker who can perform these services is a full-service broker. There are other investment brokers whose job is to handle the specific trades you want.
If you want to make investments, you need a broker to buy and sell your assets, as you need to be specifically licensed to make these transactions to make security and exchange trades. This investment broker does not start selling and buying for you until they know your investment goals to give you the correct guidance. It is the responsibility of the investment broker to do the following.
- Research on your behalf
- Personalizes advice
- Keeps you up to date on market trends
- Informs you about stock performance
- Guides you on current tax laws
This professional only has one responsibility to execute trades that you order. This type of broker does not offer you advice, nor do they review your investment portfolio. Some online brokerage firms, such as E-Trade, serve as discount brokers.
The Cost of Hiring a Broker?
The Cost of a Discount Broker
Investment brokers make their money when they perform trades. These brokers usually charge clients per trade. Discount brokers have a lower fee. For example, your cost could be as low as $5.00 or as high as $30.00 per trade through a discount broker.
The Cost of a Full-Service Broker
Since these brokers research and advise you, their charges range from $100.00 upward of $200.00 per trade. It is common for these professionals to charge an annual maintenance fee for services rendered.
If you opt to use a full-service broker, you may need at least a $500.00 deposit as an opening balance to your account.
The fees between these two types of brokers are different, and you must know what the costs entail.
As you can see, an investment broker must be trustworthy because you are entrusting your hard-earned money to this professional and firm. Unfortunately, a few investment brokers routinely practice misconduct with their clients’ money. These bad brokers continue to practice misconduct until they are caught. The following are examples of what constitutes investment broker misconduct.
You will need a seasoned and experienced attorney if this happens to you. This attorney has the experience and expertise to sort out the complexities of your case for investment misconduct.
Examples of Investment Broker Misconduct
When you hire an investment broker, you trust that broker to care for your money and financial goals. When the broker does not live up to their stated expectations, you may have a legitimate case for investment broker misconduct.
You trust your broker to make wise decisions with your money. Misconduct of that broker happens when they do all the opposite of what is expected. Our licensed and seasoned team of attorneys needs to look at the factors that point to possible investment misconduct.
We hold your best interest at heart. We fight to get your money back when a lousy broker makes you another victim of investment broker misconduct. The following are examples of investment broker misconduct.
Fiduciary Duty, Breach
Some investment brokers act as fiduciary obligated to work for your best financial interests. Acting as a Fiduciary means that this person must serve you. They are bound to share all transaction information. They never hide information that goes against your stated goals. When this professional does the opposite, you have a case for investment misconduct.
When You Did Not Authorize Trades
Your broker must have your authorization to initiate specific trades on your behalf. Investment broker misconduct occurs when your broker does not get your approval for particular transactions.
Non-discretionary accounts require you give written permission to your broker before the broker can act on your behalf. If your broker does not get this written permission, this could be a form of investment broker misconduct.
Many brokers make their money when they perform a transaction for you. Misconduct of an investment broker happens when the broker is constantly making trades on your account with the primary goal of earning a higher commission. This particular investment broker misconduct is strictly against the federal rules and regulations of the investment industry.
Did Your Investment Broker Fail To Supervise?
Some investment firms fail to supervise their brokers at that firm. That firm is noncompliant with the FINRA (Financial Industry Regulatory Authority), and hence that firm may be held accountable should any of its investment brokers show misconduct of any of their clients.
Solicited vs. Unsolicited Trades
The investment broker initiates this trade.
The client initiates the transaction.
It all depends on how the investment broker documents the trade. If the transaction was unsolicited and a solicited trade occurred, this could signify fraud and misconduct on the broker’s part.
When your broker makes an investment for you, that investment must be suitable for you. What one investor believes is suitable, another may not think it is. The following are unsuitable investments.
- A high-risk investment
- Failure of the broker to recommend adequate diversification
- When a broker recommends the client borrow money against the value of their securities without disclosing the risks.
There is a risk to everything in life, including when you decide to hire an investment broker. Some are at higher risk than others. If you invest in securities and lose some of your money, it does not always mean that your investment broker performed misconduct.
If you should lose money on an investment it does not make you a happy camper. You must be sure that your broker performed misconduct. Losing your money does not mean that your broker,
- Performed a misconduct
- Is guilty of fraud
- Acted on unintentional negligence
We need to review the facts of your claim. We will review your financial statements and all communications with your financial advisor. We will find other evidence if fraud happens to be the case.
This is when an investment is fraudulent, and your broker generates returns for older investors from new investors. Returns should come from legitimate business activities or the profit from financial trading.
These Ponzi schemes can include individuals or giant corporations. These schemes offer short-term returns that are abnormally highly or unusually consistent. Ponzi Schemes have one goal, to continually draw in new investments as these investments continue to provide returns to older investors. At some point, the flow of profits will run out, and the scheme will fail.
This type of misconduct involves criminal activity by so-called financial advisors who target valuable accounts by elderly clients. These brokers claim to be financial advisors who provide reputable financial advice to the elderly. The following are examples of how broker theft occurs.
- The broker withdraws money from the client’s accounts for personal use and makes false promises to repay the money.
- New bill pay accounts automatically withdraw funds to pay for unauthorized expenses of the broker.
Each investment firm approves specific investment opportunities. If a broker involves customers in investment opportunities that are not endorsed by their firm, it is called, Selling Away. Selling Away is an unlawful practice that is strictly prohibited by FINRA.
The goal for all leading investment firms is to ensure that any of their financial advisors sell securities only vetted by their brokerage firm. A firm’s investment brokers must strictly follow their approved list of products and investments for its clients. If a broker should wander from this approved list, it could constitute Selling Away.
Our law firm has encountered brokers who created a business and, acting as a client’s financial advisor, gives the client an excellent opportunity to invest in this groundbreaking business. During these incidents, a stockbroker is guilty of misconduct.
Churning is when a financial advisor recommends and places trades to generate fees or commissions for them the financial advisor. In these cases, the financial advisor puts their interests ahead of their client’s and violates FINRA requirements. FINRA
- Strictly requires brokers to practice the highest degree of honor possible.
- Require brokers to uphold the highest principles of trade.
For any brokers who practice churning, some red flags arise. Investment firms note brokers who rave about specific account performances. These accounts show excessive trading or churning.
What Role Do Investment Firms Play If One of Their Investors is Possibly Guilty of Misconduct?
Investment firms operate under the strict guidance of FINRA. FINRA makes investment firms responsible for the actions of their brokers. All brokerage firms must put into place a system that supervises their brokers’ activity. Investment firms must continually monitor their brokers for misconduct.
Investment firms must enforce reasonable supervision and comply with securities laws and regulations. If the investment firm does not comply, that firm is subject to liability.
Most investment firms have set in place systems such as electronic supervisory tools. These systems allow firms to monitor and review trading activity daily. These firms make sure that trading is consistent with all client’s goals.
These firms monitor and review broker account activity every month. Any account that shows excessive trade activity is monitored and flagged as unsuitable. The firm has a responsibility to speak with the broker in question, take the appropriate steps, and determine if the broker met the client’s needs.
The brokerage firm may find it necessary to speak with the client. The firm must decide if the broker invested the client’s money in suitable securities. If the brokerage firm does not follow through with the appropriate investigation, it could be found guilty of not supervising its brokers appropriately.
Common Signs of Investment Misconduct
There are many different types of investment misconduct. In most cases, investment misconduct will not be something that can be immediately or readily identified. All the possible red flags for investment misconduct will be subtle. If any of the following signs are evident, there may be misconduct on the broker’s side.
- If there are sudden and sharp drops in the value of your portfolio.
- If your broker recommends, you use a higher risk with investment strategies that make you uncomfortable.
- If your broker is non-responsive to your calls or if they seem vague and evasive with you.
- No trade is risk-free, and nothing is guaranteed in the investment industry. If your advisor describes the transaction as such, this may indicate a red flag.
- If you find out that your advisor made transactions without your written authorization.
- If your advisor recommends an unusually high number of trades.
Recommendations to Consumers Regarding Their Investment Accounts
It is recommended to review your account regularly. When you do a review of your account, look at all trades and verify that you authorized the buying or selling of each investment.
Look at each transaction for withdrawals and deposits. Affirm that your investments are performing how you expect. It is recommended to meet with your advisor at least once a month to ensure your account is sound and your plans are on track.
Listen to the economic news and take note of all updates. If the stock market is responding negatively to the current financial status, this could affect the value of your portfolio.
Your financial advisor is obligated to thoroughly answer all of your financial questions. Never settle for short and abrupt answers that do not result in a sufficient answer to your question. It is your right to know what fees are charged to your account. You never have to take a higher risk with your investments than you feel comfortable with. You have the right to speak with your financial advisor.
In Conclusion, You Need An Attorney When You are a Victim of Investment Broker Misconduct
If you are a resident of Florida and you believe you are a victim of investment broker misconduct that caused you to lose money, you need to call our law firm as soon as possible.
Our seasoned law firm is an expert in,
*Our fees are on a contingency basis.
Our experience is representing some of the most prominent banks and brokerage firms in the world regarding securities. We have handled hundreds of securities cases involving complex financial products. We have experience in cases involving traditional stocks, bonds, margins, securities-based lending, mutual funds, hedge funds, penny stocks, and structured products.
We are eager to recover your investment losses.
You hired an investment broker to make money for you and offer wise decisions on how to best care for your hard-earned money. If you ever experience an investment broker who did all the opposite that you expected them to do, you may be a victim of investment misconduct.
There is an endless list of reputable investment brokers you can fully trust with your money. These brokers make wise decisions on your behalf and work closely with you for your financial benefit.
However, a select few investment brokers prove to be untrustworthy in their actions to take care of your best financial interests. These select few brokers show gross misconduct in handling a client’s money. These brokers do just the opposite of what they should be doing in serving their clients’ financial needs.
If you believe that your investment broker did not act in your best interest and there is the possibility of misconduct on behalf of your broker, please give us a call immediately so we can review the facts of your story.
Our team of seasoned investment broker misconduct attorneys will work hard for you to get your lost money returned.