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When you invest your money with a stockbroker, you do so with a level of trust, and this trust is backed up with strong legal protections to protect your interests. Nevertheless, investment and broker fraud is all too common. Brokers take advantage of the fact they are entrusted with large sums of money and develop scams to defraud investors. If you have experience large losses to your account, the responsibility may lay with your broker.
Securities litigation is a very complex and specialized area of the law. If you feel your rights have been violated, your best recourse is to seek an experienced professional to assist you. As an aggrieved investor can consult a professional for free in an effort to ascertain the possibility of recovering losses [find an attorney].
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1. Internet Stock Analyst Fraud - In the late nineties and Nasdaq boom drover the prices of technology stocks to unprecedented heights. Today, most of those technology stocks have vanished or lost nearly all of their value. Companies such as Merrill Lynch are currently being investigated by the New York Attorney General for for recommending stocks that the analyst's companies privately disparaged.
If you lost money in technology related stocks, you may be entitled to compensation depending on the company. Find out more.
2. Unsuitability - The broker must have reasonable grounds for believing each recommendation to a customer is suitable on the basis of the customer's other securities holdings and financial situation, among other factors. For example, a biotech company developing a new mesothelioma drug with no other major assets or a company with major asbestos liability would be unsuitable for most investors.
3. Churning - (excessive trading) - is when If a broker is buying and selling securities in your account to generate commissions that seem excessive, and he always has some reason why you should take quick profits, there is a strong possibility that your account is being churned.
4. Unauthorized Trades -Brokers must have expressed and detailed permission of the customer unless the broker and the broker's firm have been granted written discretionary authority by the customer.
5. Failure to execute order (including online trading errors) - Brokers can't refuse your order and are responsible for executing orders in a timely fashion.
6. High Pressure Selling / Misinformation - some brokers use illegal techniques to sell their "house stocks".
7. Over Concentration - Brokers must assure that the portfolios of their clients are balanced with a diversity of investments.
8. Illegal Accounts - A broker cannot place a client's money into his own personal account or set up false accounts.
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Questions to ask yourself
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1. Is most of your money invested in one type of security or market sector, such as technology (over concentration)?
2. Has your broker or online trading system failed to execute an order (failure to execute)?
3. Has there been a great deal of excessive trading activity in your account (churning)?
4. Has your broker ever suggested you invest in a company based on "inside information" (misrepresentation)?
5. Is your broker subjecting you to high-pressure sales tactics when selling you a security (stockbroker fraud)?
6. Have you ever been pressured to invest when you weren't comfortable in the investment (unsuitability)?
7. Have you traded on margin without fully understanding the inherent risks (unsuitability)?
8. Do you feel you have been mislead by a stockbroker or a financial planner about an investment (misrepresentation)?
9. Do you feel someone misrepresented investment returns and/or the risks associated with an investment that was sold to you (unsuitability)?
10. Has your broker ever made a purchase for your account that you did not expressly authorize him to make unauthorized trade (unauthorized trading)?
11. Has your broker ever recommended that you use a different address for your account other than your home or business address (false accounts)?
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