In modern society, investing in stocks is a cornerstone of most prudent, informed financial strategies. Many people rely on brokerage firms and advisors to help them invest their money in sound ways that are appropriate for the individual’s age, goals, risk tolerance and available finances. Because of the reliance investors place on their brokers, brokers are expected to provide honest advice and full, accurate information about the stocks they recommend to clients so the clients can make informed decisions. Unfortunately, far too many brokers conceal information or otherwise deceive clients, leading to significant investor losses.
At Girard Bengali, APC, our attorneys believe investors are entitled to accurate information about any investment they are considering. Brokers who provide misleading, false or incomplete information about an investment opportunity should be held responsible for the losses suffered by the investors who trusted them. Our firm is dedicated to holding dishonest brokers accountable through securities arbitration and litigation on behalf of our clients.
Examples of Misleading or Incomplete Stock Information
In general, most brokers and brokerage firms understand the influence they have over investors and most of them act ethically. But when a broker or firm begins to act in ways designed to deceive investors, the damage can be great. For the average investor, recognizing when they are being misled is very difficult because the broker is in a position of trust and because the language of the investing world is highly technical and specialized.
Here are a few of the common ways in which brokers mislead or omit material information when dealing with investors:
- Falsifying financial reports: Dishonest brokers can use simple tools like a desktop computer and a color printer to produce misleading or outright fabricated information, including false financial reports that show your account doing well when in reality the broker is siphoning funds from the account to himself.
- Manipulative accounting procedures: Most people don’t know how to analyze financial statements at a sophisticated level, making it relatively easy for a dishonest broker to falsify accounting statements and related documents. Brokers can also provide false explanations of accounting methods and policies to get investors to believe lies about the performance of an investment.
- Failure to disclose litigation: Brokers sometimes encourage investors to put their money in companies that the broker knows are involved in litigation. Often, the litigation is serious and could cause the company to fail. When a broker does not disclose the fact that a company is in litigation, the investor does not have full information upon which to base a decision, and the broker has committed fraud.
- Failure to disclose a conflict of interest: What if a broker called you to recommend that you buy a stock, and you do so, only to find out later that the broker had a major ownership stake in the company but didn’t tell you about it? The broker has failed to disclose a conflict of interest and that is a form of fraud for which the broker must be held liable.
- Avoiding discussions about risk: Stockbrokers have a duty to discuss the potential risks of an investment, including the risk of loss, the risk that an investment might not be easily sold in the future, and inflation risk. Failure to do so means the investor gets incomplete information about the stock and the broker may be held liable for losses incurred by the investor.
FINRA, the agency that regulates stockbrokers, says that brokers owe a duty of fair dealing to clients. Fair dealing includes providing accurate and truthful information. Making misrepresentations to clients, whether by lying or by omitting information, is a violation of FINRA rules as well as federal and state securities laws.
We Help Investors Who Have Suffered Losses Due to Misrepresentation
At Girard Bengali, APC, we believe transparency matters in investing. Stockbrokers who mislead client, omit information, or otherwise deceive investors should be held accountable. Our attorneys frequently represent defrauded clients in FINRA arbitrations and litigation. If you believe your broker’s misrepresentations caused investment losses to you, please call 866-778-6821 or send us an email to speak with our lawyers. We have offices in Los Angeles, Newport Beach and San Francisco, California..