The Role of Federal Securities Laws

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Standard of conduct for investment advisers

As a result of the risks to clients in entrusting their property to advisors the law evolved over time to impose certain duties on advisors. the two primary duties are: the duty of loyalty and the duty of care. The duty of loyalty requires advisors to refrain from converting or misappropriating the money and from using it for unauthorized purposes or for personal gain. If your financial advisor lost your money and did not fulfill it's duty's your advisor may owe you money damages to compensate your for your loss and there failure to do what they where supposed to. The definition of "security, role and functions of the SEC and its staff, the effect of recent market turmoil, Public Offerings, Registration Statements, Disclosure, Securities Exchange Act of 1934: Periodic Disclosure and Antifraud Provisions. civil liability under the antifraud provisions, are all part of it.


Rules providing the standard of conduct for investment advisers- investment advice - How to recover

The duty of care is about Process. clients have a legal right to receive quality advisory services, commensurate with reasonable expectations. among other things: advisors need to show they (i) gather pertinent information; (ii) analyze and deliberate before making a decision; and (iii) apply their expertise and skills in the decision- making process. when providing personalized investment advice about securities to a retail customer. To ensure these criteria are satisfied, investment advisers might be expected to consider whether they should: identify an investment objective, risk tolerance, and investment time horizon for each client; utilize an investment policy statement to define a specific investment strategy; ensure they have a process to select asset classes consistent with the identified investment objective, risk tolerance, and investment time horizon; verify that selected asset classes are consistent with implementation and monitoring constraints; and have a process to mon


Did your advisor really earn his fee?

If an advsor charged a fee and did not earn it he may have to retern the money The Advisers Act does not explicitly address or regulate the kinds or amounts of fees an investment adviser may charge clients for advisory services, except with regard to erformance-based fees. However, the Commission staff has interpreted the Advisers Act's general antifraud provision as requiring fair and full disclosure to clients of the fees an adviser charges clients, including, where relevant, whether the fees charged are excessive in relation to fees charged by other advisers for comparable services.


Did your advisor allocate your assets?

Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. The process of determining which mix of assets to hold in your portfolio is a very personal one. The asset allocation that works best for you at any given point in your life will depend largely on your time horizon and your ability to tolerate risk., it is misleading to make statements such as "asset allocation explains 93.6% of investment return".even "asset allocation explains 93.6% of quarterly performance variance" leaves much to be desired, because the shared variance could be from pension funds' operating structure.[ Hood, however, rejects this interpretation on the grounds that pension plans in particular cannot cross-share risks and that they are explicitly singular entities, rendering shared variance irrelevant. The statistics were most helpful when used to demonstrate the similarity of the index return series and the actual return series.


Did your advisor consider your time horizon?

Time Horizon - Your time horizon is the expected number of months, years, or decades you will be investing to achieve a particular financial goal. An investor with a longer time horizon may feel more comfortable taking on a riskier, or more volatile, investment because he or she can wait out slow economic cycles and the inevitable ups and downs of our markets. By contrast, an investor saving up for a teenager's college education would likely take on less risk because he or she has a shorter time horizon.


Did your advisor consider your risk tolerance?

Risk tolerance is your ability and willingness to lose some or all of your original investment In exchange for greater potential returns. An aggressive investor, or one with a high-risk tolerance, is more likely to risk losing money in order to get better results. A conservative investor, or one with a low-risk tolerance, tends to favor investments that will preserve his or her original investment. In the words of the famous saying, conservative investors keep a "bird in the hand," while aggressive investors seek "two in the bush."


Did your advisor consider your Risk versus Reward?

When it comes to investing, risk and reward are inextricably entwined. You've probably heard the phrase "no pain, no gain" - those words come close to summing up the relationship between risk and reward. Don't let anyone tell you otherwise: All investments involve some degree of risk. If you intend to purchases securities - such as stocks, bonds, or mutual funds - it's important that you understand before you invest that you could lose some or all of your money. The reward for taking on risk is the potential for a greater investment return. If you have a financial goal with a long time horizon, you are likely to make more money by carefully investing in asset categories with greater risk, like stocks or bonds, rather than restricting your investments to assets with less risk, like cash equivalents. On the other hand, investing solely in cash investments may be appropriate for short-term financial goals


Did your advisor consider your Investment Choices?

You should know that a vast array of investment products exists - including stocks and stock mutual funds, corporate and municipal bonds, bond mutual funds, lifecycle funds, exchange-traded funds, money market funds, and U.S. Treasury securities. For many financial goals, investing in a mix of stocks, bonds, and cash can be a good strategy. Let's take a closer look at the characteristics of the three major asset categories.Problems with asset allocation There are various reasons why asset allocation fails to work. The long-run behaviour of asset classes does not guarantee their shorter-term behavior.


Did your advisor consider Stocks?

Stocks have historically had the greatest risk and highest returns among the three major asset categories. As an asset category, stocks are a portfolio's "heavy hitter," offering the greatest potential for growth. Stocks hit home runs, but also strike out. The volatility of stocks makes them a very risky investment in the short term. Large company stocks as a group, for example, have lost money on average about one out of every three years. And sometimes the losses have been quite dramatic. But investors that have been willing to ride out the volatile returns of stocks over long periods of time generally have been rewarded with strong positive returns.


Did your advisor consider Bond?

Bonds are generally less volatile than stocks but offer more modest returns. As a result, an investor approaching a financial goal might increase his or her bond holdings relative to his or her stock holdings because the reduced risk of holding more bonds would be attractive to the investor despite their lower potential for growth. You should keep in mind that certain categories of bonds offer high returns similar to stocks. But these bonds, known as high-yield or junk bonds, also carry higher risk.


Did your advisor consider Cash?

Cash and cash equivalents - such as savings deposits, certificates of deposit, treasury bills, money market deposit accounts, and money market funds - are the safest investments, but offer the lowest return of the three major asset categories. The chances of losing money on an investment in this asset category are generally extremely low. The federal government guarantees many investments in cash equivalents. Investment losses in non-guaranteed cash equivalents do occur, but infrequently. The principal concern for investors investing in cash equivalents is inflation risk. This is the risk that inflation will outpace and erode investment returns over time


Stocks, bonds, and cash are the most common asset categories

Stocks, bonds, and cash are the most common asset categories. These are the asset categories you would likely choose from when investing in a retirement savings program or a college savings plan. But other asset categories - including real estate, precious metals and other commodities, and private equity - also exist, and some investors may include these asset categories within a portfolio. Investments in these asset categories typically have category-specific risks. Before you make any investment, you should understand the risks of the investment and make sure the risks are appropriate for you.


Why Asset Allocation Is So Important

By including asset categories with investment returns that move up and down under different market conditions within a portfolio, an investor can protect against significant losses. Historically, the returns of the three major asset categories have not moved up and down at the same time. Market conditions that cause one asset category to do well often cause another asset category to have average or poor returns. By investing in more than one asset category, you'll reduce the risk that you'll lose money and your portfolio's overall investment returns will have a smoother ride. If one asset category's investment return falls, you'll be in a position to counteract your losses in that asset category with better investment returns in another asset category.


The Magic of Diversification.

The practice of spreading money among different investments to reduce risk is known as diversification. By picking the right group of investments, you may be able to limit your losses and reduce the fluctuations of investment returns without sacrificing too much potential gain. finance, diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of its constituentsDiversification is one of two general techniques for reducing investment risk. The other is hedging. Diversification relies on the lack of a tight positive relationship among the assets' returns, and works even when correlations are near zero or somewhat positive. Hedging relies on negative correlation among assets, or shorting assets with positive correlation


Your advisor may owe you money damages to compensate your for your loss and there failure to do what they where supposed to

Determining the appropriate asset allocation model for a financial goal is a complicated task. Basically, you're trying to pick a mix of assets that has the highest probability of meeting your goal at a level of risk you can live with. As you get closer to meeting your goal, you'll need to be able to adjust the mix of assets., diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of its constituents.[1] Therefore, any risk-averse investor will diversify to at least some extent, with more risk-averse investors diversifying more completely than less risk-averse investors.


If an advsor charged a fee and did not earn it he may have to retern the money

Some financial experts believe that determining your asset allocation is the most important decision that you'll make with respect to your investments - that it's even more important than the individual investments you buy. With that in mind, you may want to consider asking a financial professional to help you determine your initial asset allocation and suggest adjustments for the future. But before you hire anyone to help you with these enormously important decisions, be sure to do a thorough check of his or her credentials and disciplinary history.


Your advisor may owe you money damages to compensate your for your loss

The most common reason for changing your asset allocation is a change in your time horizon. In other words, as you get closer to your investment goal, you'll likely need to change your asset allocation. For example, most people investing for retirement hold less stock and more bonds and cash equivalents as they get closer to retirement age. You may also need to change your asset allocation if there is a change in your risk tolerance, financial situation, or the financial goal itself. But savvy investors typically do not change their asset allocation based on the relative performance of asset categories - for example, increasing the proportion of stocks in one's portfolio when the stock market is hot. Instead, that's when they "rebalance" their portfolios.


Your advisor most know about you or he may have had you take to much risk

Rebalancing is bringing your portfolio back to your original asset allocation mix. This is necessary because over time some of your investments may become out of alignment with your investment goals. You'll find that some of your investments will grow faster than others. By rebalancing, you'll ensure that your portfolio does not overemphasize one or more asset categories, and you'll return your portfolio to a comfortable level of risk. For example, let's say you determined that stock investments should represent 60% of your portfolio. But after a recent stock market increase, stock investments represent 80% of your portfolio. You'll need to either sell some of your stock investments or purchase investments from an under-weighted asset category in order to reestablish your original asset allocation mix.


Did your advisor tell you about rebalancing?

You can rebalance your portfolio based either on the calendar or on your investments. Many financial experts recommend that investors rebalance their portfolios on a regular time interval, such as every six or twelve months. The advantage of this method is that the calendar is a reminder of when you should consider rebalancing. Others recommend rebalancing only when the relative weight of an asset class increases or decreases more than a certain percentage that you've identified in advance. The advantage of this method is that your investments tell you when to rebalance. In either case, rebalancing tends to work best when done on a relatively infrequent basis. There are basica


Lots of trading may be a reson for your losses

Whether it's recommending unsuitable investments, making false statements, omitting material information or simply negligence you may be able to get your money back by filing an arbitration. Questions or Complaints? They want to hear from you if you encounter a problem with a financial professional or have a complaint concerning a mutual fund or public company. Please send them your complaint using their online Complaint Center. You can also reach them by regular mail at: Securities and Exchange Commission Office of Investor Education and Advocacy 100 F Street, N.E. Washington, D.C. 20549-0213

Additional Resources

Howard Roitman, Esq. 8921 W. Sahara Ave., Las Vegas, Nevada 89117 (702) 631-5650


Financial Industry Regulatory Authority (FINRA)

US Department of labor

Nevada Bar

Howard Roitman

Slip & fall

Crash law


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