Do I have a claim against a securities broker or financial professional for negligence or fraud?

Posted over 3 years ago. 3 helpful votes


You may ask whether you have a claim against your broker or financial professional in connection with the sale or purchase of an investment. Although each case is unique, here are the top-4 issues to consider:


Financial Needs and Investment Objectives

Brokers are required to recommend investments that are consistent with each individual's financial needs and investment objectives. In the securities industry, this is known as the "suitability" rule. For example, a senior with limited income and assets usually needs to preserve his or her "nest egg" for living expenses. If a broker recommends that a senior purchase an investment with (1) moderate to high risk or (2) "locks up" the principal for a period of time or (3) assesses a penalty if funds must be withdrawn, the investment must be scrutinized.


Account Activity

Are your account statements showing irregular activity? If your broker is buying and selling investments within your account on a regular basis, you should explore the reasons why this activity is taking place. It may be entirely appropriate or it could be an indication that the investments are not suitable for you, or worse, that your account is being "churned." "Churning," another industry term, occurs when a broker engages in purchases or sales of securities for the sole purpose of generating commissions.


Account Losses

Is your investment account experiencing drastic or inconsistent changes in value? If you were promised that your principal was protected and/or that the investment involved little to no risk, you should scrutinize the investment to determine the reason for the losses.


Consistency Between Sales Pitch and Account Documents

If a review of your account demonstrates irregular account activity or significant losses, then review your account documents. Was the broker's "sales pitch" consistent with the "fine print" in the account documents? If you find this to be a difficult task, don't be shy about asking another broker, financial professional, accountant or an attorney versed in securities laws to evaluate the "suitability" of the investments that you have purchased.

Additional Resources

Most securities and investment claims are resolved in arbitration, rather than in a court of law. Review your account opening paperwork for dispute resolution procedures. Most likely, you’ll be required to pursue your claim in arbitration. If so, most arbitration forums, such as FINRA, provide easy access to the arbitration rules. You may find more information about FINRA arbitration claims here:

Ewusiak & Roberts, P.A.

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