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Types of Stock Broker Misconduct Which May be Compensable

Posted by attorney Jonathan Evans

Types of Misconduct by your Broker

There are many types of misconduct possible on the part of a broker or financial advisor. We will cover some of the most common here to give you some idea of what to look for and be aware of. For a thorough understanding of each of these, we encourage you to read through the website on each topic. If you suspect that your broker may be guilty of misconduct, please do not hesitate to contact our firm.

Churning is the dishonest practice by brokers of executing trades for the sole purpose of generating commissions. It is illegal. If your account shows excessive trading occurring, there is a possibility that your broker is churning. Unauthorized trading is just that. Trades were made on your account that you did not approve beforehand. There can be many devious tactics used by dishonest brokers to defend the trades that they made. Practicing law for 35 years, we are aware of them all and we can recognize the signs of unauthorized trading. If an investor is living on a small pension, has inherited some money he would like to invest, and chooses a broker who invests that money in high risk investments, that broker could be charged with recommending unsuitable securities to his client.

Failing to diversify an investment properly can also be a violation of the rules regarding suitable investments. This is also referred to as overconcentration. Brokers are only allowed to offer or sell securities that the firm to which he is associated is offering or selling. If your broker tries to sell you securities that are not on the list of approved products from his firm, he is said to be selling away. All of these constitute forms of fraud on the part of your broker. There are more. When a broker either omits facts, or fraudulently portrays an investment to his client, he can be guilty of misrepresentation/omission. Theft/conversion refers to a broker using conversion in order to defraud his client. Ponzi schemes have become much more broadly known over the past few years with some of the most destructive examples in the history of the securities industry.

If a broker, investment adviser or brokerage firm fails to live up to their fiduciary duties, it is labeled as misconduct. The tragic examples we have seen in the news of investors losing their life savings must not be tolerated. Legal action is an effective weapon against the dishonest and unscrupulous individuals that populate the investment world. To fight against them effectively, you need an experienced and trustworthy legal representative. The Law Offices of Jonathan W. Evans & Associates have been providing this assistance to clients across the nation and around the world. We have a reputation amongst our peers for high ethical standards and skill in our profession.

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