Although every brokerage firm, investment advisory firm and individual financial advisor or stockbroker may have a different approach or philosophy to investing, they all have one thing in common: their jobs require people to trust them with their money. When you place your trust in your advisor, you probably have goals in mind – retirement, college, a major purchase and so on. Regardless of whether you are a sophisticated investor, you have the right to expect that your advisor will always act legally and in your best interest.
If you now suspect that your advisor has engaged in misconduct or fraud that has damaged you financially, talking to a lawyer is highly recommended. The team at Girard Bengali, APC, is built specifically to help investors, both individual and institutional, who have been harmed by securities industry misconduct. Our securities attorneys have recovered millions of dollars on behalf of clients in cases ranging from relatively straightforward to highly complex. We have the skill, experience and resources necessary to unravel even the most intricate web of transactions to trace down fraud and hold advisors responsible.
Common Examples of Investment Advisor Misconduct
Investment advisors can fail to live up to their professional duties in a variety of ways. From outright theft or forgery to steering investors’ money into unsuitable strategies or financial products to obtain higher commissions, there are myriad ways an advisor can take advantage of a client. Our attorneys handle every type of investment fraud and broker misconduct claim, some of the most common examples of which include:
- Breach of fiduciary duty: Certain financial advisors, known as registered investment advisors (RIAs), owe fiduciary obligations to their clients. RIAs are regulated by the Securities and Exchange Commission (SEC), which specifies that fiduciary duties include acting with undivided loyalty and utmost good faith, fully disclosing all material facts a reasonable investor would find important, not misleading clients, avoiding conflicts of interest, and not using client assets for the advisor’s own benefit. An RIA’s failure to uphold these duties may be a sign of fraud.
- Unsuitable investments: Even if they are not fiduciaries, investment advisors must always determine the suitability of an investment for a particular person. Whether an investment is suitable depends on factors like the person’s objectives, risk tolerance, and financial situation. Unscrupulous advisors often put client money in vehicles that are unsuitable for the investor but provide higher fees and commissions for the advisor.
- Material misrepresentations or omissions: Advisors have a duty to make fair and honest representations to clients when recommending an investment. Some advisors knowingly conceal important facts to entice a client to invest in something, and then the client loses money. These are complex legal claims that require experienced counsel.
- Failure to diversify: Also called overconcentration, failure to diversify occurs when an advisor pushes investors into a narrow set of investments, or even a single investment, rather than a diversified portfolio which can act to “spread the risk around” so a single loss does not devastate to the entire account.. For example, a recommendation to put all your money into gold or into a single stock would be overconcentration.
- Churning/excessive trading: Some advisors will buy and sell securities in a client’s account just to generate more commission fees for themselves. This is called churning, and it is a form of fraud.
- Unauthorized transactions: Unless a client has given an advisor discretion or control over the decision-making process, advisors must obtain the proper authorization before executing any trades in a client’s account. Sadly, some advisors make trades in order to cover other losses or advance their own financial interests, not the client’s. The laws about unauthorized trading are very clear, yet far too many advisors still engage in this fraudulent practice.
- Selling away: Advisors may try to avoid their firm’s compliance department by selling securities that aren’t actually offered by the firm. This type of behavior is inappropriate and the advisor and/or the firm could be sued for securities fraud.
- Ponzi schemes: In this type of fraud, investors are promised quick returns that in reality, are not based on earned profit, but instead depend on new money coming in from an ever-widening ring of investors. When the pool of investors stops growing, the money dries up, leaving investors out in the cold.
Investors who have suffered losses due to these or any other types of investment advisor fraud deserve to be compensated, whether through securities arbitration or in court.
Contact Our Attorneys to Discuss Your Legal Options Regarding Advisor Misconduct
At Girard Bengali, APC, our experienced attorneys are committed to helping investors recover full and fair compensation for losses resulting from fraud. To arrange a confidential consultation with our lawyers, please call 866-778-6821 or contact us online and we will respond promptly.
