Many investors understand that investing money can be a risky undertaking. What they do not realize is that many of these losses occur due to misconduct, negligence or outright fraud on the part of stockbrokers and financial advisors.
Here are some common questions from victims of investment loss.
How did I fail to see the warning signs of an investment loss?
The unfortunate thing is that fraud and broker misconduct usually happens every day in the financial world. Even individuals who are well-informed fall prey to this trap. Here are some signs that your financial advisor or broker may not be totally on the up and up.
- If you find unexpected and unauthorized trades on your statements.
- If the broker provides you with a statement which isn’t matching with your records.
- If you find out that fees on your statements are not matching with whatever was agreed upon at the beginning.
- If your broker has over-concentrated your portfolio with a single investment.
- If you find out that the broker is constantly trading your investment without your consent.
- If you find out that your broker is earning large commissions of money even when you trade at a loss.
Firms and financial professionals are closely regulated, then why check their credentials?
For sure, these brokers are closely regulated. This is the reason why some states have security regulators of their own. In case a broker is managing assets whose value is 100 million dollars or more, then some state organizations such as the SEC and the financial industry regulatory authority or the FINRA normally gets involved. These firms and brokers are also closely monitored and regulated by many federal and state laws.
You should be aware that many fraudsters are sneaky. Some usually act outside the scope of normal business to get around set rules and regulations. What they do is that they fail to report outside business activities and end up offering unsecured investments to their customers. Some even claim that they are registered even when they are not.
What investors can do to avoid being a fraud in this manner is to use the following resources to check the credentials of a broker or firm before they go ahead and them with any money.
- SEC investment Advisor Public Disclosure (IAPD). This body gathers the background information related to broker-dealer firms or any other broker.
- FINRA’s BrokerCheck. This one can disclose to you any disciplinary action or complaint filed against firms and brokers. It will also indicate whether a broker is registered or not.
- North American Administrators Association. This body normally helps investors with contact information for state regulators who can be of assistance to customers when filing a complaint against a firm or a broker.
Investing is a risky undertaking, should one be expecting a loss?
What one should know is that losses don’t have to be a of life to any investor. There are several ways that an irresponsible broker behavior may be exposing customers to risks that are uncalled for. They include;
- Recommending unsuitable investment which is not following your goals and risk tolerance.
- Churning. This occurs when a broker constantly trades in order to earn his/her commission. This kind of activity does not generate any income for the investor. This usually happens when the investor allows the broker to makes trades without their necessarily seeking their permission.
- Overconcentration. This is when a broker invests heavily in a single trade. The risk involved in such an instance is high. It can lead to some serious losses in case the investment goes in the wrong direction.
- Selling away. This happens when the firm constantly trades in securities that do not have the investors approval. This comes by when a broker chases after high commissions which only come through some highly risky investments. This exposes the trader to unnecessary risks which may lead to huge losses.
How can a securities lawyer help you recover investment losses?
If you have suffered some serious investment losses, then what you should do is consult a securities lawyer immediately. The legal options that are available to you will depend on some different factors.
Your securities fraud attorney will have to conduct a comprehensive investigation regarding the case you have filed. The lawyer will review some key issues which include;
- Your relationship with the brokerage firm or financial advisor.
- The financial documents and records which you hold.
- The total accrued losses you sustained due to the possible negligence or fraud by the broker.
- The promises that the broker had given you before engaging in business. Once the attorney has all this information at hand, he/she will be able to determine exactly the kind of action to take to make the ideal claim which will result in fair and full compensation for the losses you incurred.