Stock Broker Scams to Watch Out For
Stock brokers are trusted to handle the accounts of investors in order to generate returns. However, many stock brokers engage in scams in order to further their own financial interests, without regard for the impact these investments will ultimately have on the investor.
The securities industry is complex, which provides unscrupulous stock brokers the perfect opportunity to take advantage of their clients in a number of different ways. Below, we go into greater detail about some of the most common types of stock broker scams so you have a better idea of what to look out for in your securities portfolio.
One of the most common types of stock broker scams is misrepresentation. Every time a transaction is made in your accounts, your broker generates commissions. For this reason, it is in their best interests to get you to make trades and other transactions.
Stock brokers will frequently go so far as to mislead you or omit facts about the investment to get you to agree to the trade. Maybe the stock broker has inflated the financial security of the company in question; or, perhaps they failed to disclose the risks of this particular investment when they made the recommendation.
The best way to protect yourself from misrepresentation is to do your own research before authorizing any transactions through your accounts.
Unauthorized trading is another common scam that often happens to investors who don’t pay close attention to the transactions in their accounts. Basically, if your stock broker did not get your permission to make or purchase a trade, then they are guilty of unauthorized trading.
However, this is only true in cases where you are in a non-discretionary agreement. This means that the stock broker must get your permission prior to making trades in your accounts. If your account is discretionary, stock brokers have the right to trade within your account without prior authorization.
Making unsuitable recommendations is one of the most frequently seen types of stock broker misconduct. Suitable trades are those that align with the goals of your securities portfolio. Say, for example, that you told your stock broker to invest in lower-risk trades. If they then turned around and purchased a series of junk bonds, this would not be considered a suitable trade.
Or if you are in your sixties and were recommended to invest in an annuity, this would also likely not be suitable, as annuities do not generate returns for decades, and penalize you for withdrawing money before the account has matured.
Contact a Stock Broker Misconduct Lawyer
If you have been a victim of misrepresentation, unauthorized trading, unsuitability, or another type of stock broker scam, reach out to a qualified stockbroker misconduct lawyer at Wolper Law Firm. We may be able to assist you with recovering your losses through FINRA arbitration.
Call at 800-931-8452 or complete the online contact form below to schedule a free, no-obligation consultation.
- Investment Loss Recovery Options For Investors In The 1INMM Capital, LLC Ponzi Scheme Perpetrated By Actor Zachary Horwitz a/k/a Zachary Avery
- J.W. Cole Financial, Inc. Sanctioned by FINRA for Sales Practices Relating To Sales And Supervision Of LJM Preservation & Growth Fund
- Cambridge Investment Research, Inc., Sanctioned by FINRA for Sales Practices Relating To Sales And Supervision Of LJM Preservation & Growth Fund
- Former Torch Securities Broker Jeremy Johnson Barred By FINRA After Allegedly Making Misrepresentations To Customers
- Former Lincoln Douglas Investments Broker Herbert G. Frey Sanctioned By FINRA For Alleged Unauthorized Trading
- Two Customer Complaints Pending Against Ausdal Financial Partners, Inc. Investment Advisor and Broker Kurt Baldry
- Concorde Investment Services Broker, Mark Huber, Has Two Customer Complaints, Alleging Sales Practice Misconduct
- Unsuitability Allegations Pending Against Previously Registered Voya Financial Advisors, Inc. Financial Advisor and Broker David R. Wall
- Common Types of Alternative Investments
- Did You Purchase GPB Capital Holdings Private Placements Through McNally Financial Services Or Daniel Poland