What Are the Common Signs of Investment Misconduct?

Investment related misconduct comes in many forms. It can be out in the open and flagrant but most often it is concealed and subtle. The hallmark signs of investment misconduct are:

  • Sudden, precipitous drops in the value of your portfolio, particularly when not in tandem with the overall financial markets
  • Your financial advisor is recommending that you pursue an investment strategy that carries a higher degree of risk with which you are comfortable
  • Portfolio concentration in a single security, sector of the market or asset class
  • Your financial advisor is evasive and non-responsive
  • Your financial advisor describes a trade or strategy as risk-free or guaranteed
  • Transactions are made without your authorization or with insufficient justification
  • A high number of transactions are recommended by a financial advisor

To minimize the likelihood that you will be a victim, there are several procedures that investors can and should implement, including the following:

  • Regularly review your account statements. There is a wealth of information that will allow you to:
    • Confirm that you have authorized the purchase and/or sale of the investments in your account;
    • confirm deposits/withdrawals; and
    • evaluate the performance of your investments.
  • Have quarterly meetings with your financial advisor to discuss your accounts and the strategy going forward.
  • Pay attention to the news. If there is political or economic acrimony, there is a higher likelihood that the financial markets will respond negatively. These changes could impact the value of your portfolio.
  • Do not accept short, non-responsive answers from your financial advisor. If you have question about your investments, you are entitled to an answer.
  • Ask your financial advisor for the fees and commissions that are being charged in the account. This includes fees associated with new issue securities, such as IPOs. 
  • Brokerage firms periodically send correspondence to customers, advising them of the risk profile of their investments. If you are told that an investment you own carries more risk than you are comfortable with, have a discussion with your financial advisor or their branch manager.

The Wolper Law Firm, P.A. represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, P.A., is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at mwolper@wolperlawfirm.com.

Attorney Matthew Wolper

Attorney Matthew WolperMatt Wolper is a trial lawyer who focuses exclusively on securities litigation and arbitration. Mr. Wolper has handled hundreds of securities matters nationwide before the Financial Industry Regulatory Authority (FINRA), American Arbitration Association (“AAA”), JAMS, and in state and federal court. Mr. Wolper has handled and tried cases involving complex financial products and strategies ranging from traditional stocks and bonds to options, margin and other securities-based lending products, closed/open-end mutual funds, structured products, hedge funds, and penny stocks. [Attorney Bio]