Skip to main content

Is a financial advisor who violates Finra and Sec rules required by law to pay the lawyers fees needed to recoupe the investment

San Jose, CA |
Filed under: Professional ethics

Financial Advisor used my money to pay off his own personal debt without my knowledge. I am trying to get all my money back but have incurred a large lawyer fee. Am I, the victim, stuck paying it?So far I have received timely payments on the investment of 3 months , but there is no proof the principle can be paid back when the note is due, and it was not something that should have been done.

Attorney Answers 2


  1. Best answer

    One possible course of action to discuss with your attorney is referring the matter to the SEC and DOJ. If the government takes over the case you might obtain the same result without incurring attorney's fees. The SEC has civil power to initiate a suit and seek disgorgement and civil fines that you would have the right to recoup. The SEC may refer the matter to the DOJ (U.S. Attorney's Office) for criminal action. If this is the case, the defendant may likely end up paying restitution as part of a plea deal in order to avoid prison time. This would also go to you.

    However it is important that you do not threaten criminal or disciplinary action in this case as you could expose yourself to extortion charges. It is unlawful to threaten criminal action in order to gain leverage in a civil case. But it is not unlawful to contact the SEC, FBI or DOJ, or to file a police report. Often the authorities are disinclined to commence criminal proceedings where a civil suit is already in place, but not always. You should let your attorney do all of tha talking.

    The issue arising in many of these cases is often one of practicality-- defendant's ability to pay. If your financial advisor needed to use your money to pay off a personal debt it is likely that you are throwing good money after bad and devoting time and resources to suing a penniless defendant. The law and facts may be on your side but if the defendant is without resources to pay, you will be chasing him/her forever in an attempt to enforce your judgement. Fraud is a non dischargeable debt in bankruptcy so he won't be able to seek bankruptcy relief, but he may dodge collection indefinitely. Before you devote significant funds to this case you should talk to your lawyer about steps that can be taken to investigate your defendant's background and assets to determine ability to pay.

    Depending on the amount stolen from you, you will also want to determine a litigation budget and to talk to your attorney about ways in which you can stay within budget. For example, if your financial advisor stole $100,000 from you, your lawyer should talk to you about the following:

    A. Potential (realistic) size of damage award in the case (assuming you win your case)
    B. Settlement Value
    C. The time and cost likely associated with each (early settlement will be less costly than obtaining a judgment)
    D. Likelihood of success on the merits of your case.
    E. Collectibility on any judgement you obtain

    All of the foregoing will boil down to some "fuzzy math" and be based on your attorney's educated guess as to each of these. However it can still be instructive. For example, if your attorney tells you the judgment value is $140,000 and that you have a strong case, let's say 85% chance of success on the merits. Based on the background check however, it is uncertain what his assets are, but he has hired private counsel so has some funds. Let's say there is a 50% chance of collecting the judgement, your $140,000 case has a value of something like $60,000 when you factor in the chances of losing and 50% chance of collection. How much capital do you want to invest in order to chase this $60K probable outcome? You may want to seek early settlement in the foregoing. If defendant only has $40,000 today, you may want to settle now before he burns that capital on attorney's fees. The same caveat applies to referring your case to the authorities.

    As we don't know enough about your case, you should not consider my answer to be legal advice. You would need to consult with an attorney at length and include details about what has occurred in order to adequately assess your criminal exposure.


  2. This is a very specific question that is not ethics based. The answer will depend on whether Finra and the Sec rules provide for attorney fees in the event of a claim under these circumstances. The general rule in America is that each party pays their own legal fees. There is a greater ability to obtain fees in federal court if you've brought suit there. I suspect that your attorney is telling you that you cannot collect fees and he's probably correct. However, if you haven't asked, ask him or her.

    This response does not create an ongoing duty to respond to questions, nor does it form an attorney-client relationship, it is simply the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change. The Answering Attorney is licensed to practice law only in the Commonwealth of Pennsylvania. Responses are based solely on Pennsylvania law unless stated otherwise.

Professional ethics topics

Top tips from attorneys

What others are asking

Can't find what you're looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer

Browse all legal topics