What Is Stockbroker Fraud?
What many trusting investors don’t realize is that not all stock losses are caused by fluctuations in the stock market or because the investment itself was a poor choice. Sadly, one common way investors lose money is through their stockbroker’s fraudulent actions.
There are more than just a few ways that stockbrokers can take advantage of investors’ funds. Further, fraudulent investment can even extend beyond individual investors and can involve entire departments at financial institutions. Read on to find out more about some of the common types and forms of stockbroker fraud and what you can do if you’ve been a victim of these schemes.
Common Stockbroker Fraud Schemes
Even for experienced investors, financial markets can be complex, and complexity is often used as an excuse to disguise fraudulent activity. Below are several types of schemes our stockbroker fraud attorneys in California regularly see.
Making unsuitable investment recommendations – Your broker has an obligation to make recommendations that align with your investment objectives and risk tolerance. Any investment opportunity that does not help you achieve your goals or is outside of stated risk parameters, and results in substantial losses, could be considered an unsuitable investment.
Failure to diversify – A lack of portfolio diversification is one of the worst mistakes a stockbroker can make. You’ve heard the phrase “don’t put all of your eggs in one basket.” Lack of diversification is an over concentration of your investment portfolio in one area. It’s very risky, in light of the volatility of the financial markets.
Failure to supervise – Financial institutions must monitor their activities and employees for fraud. If they fail to properly supervise, they could be held responsible for fraudulent conduct.
Selling away – Selling away occurs when a broker sells securities to a client that have not been approved by the brokerage firm. Often, when a broker is selling away, he or she is selling private securities offerings to a customer in which he or she has a personal, vested interest. Selling away can lead to devastating investment losses because the securities are not properly vetted and are, in most cases, speculative and not suitable for the typical investor.
Unauthorized trading – If you don’t have a discretionary account and your broker executed transactions in your accounts without your permission, they can be held accountable for unauthorized trading.
Excessive trading (churning)– Churning involves making too many trades within an investor’s account in order to generate more broker commissions, at the expense of an investor’s portfolio.
Misrepresentation or omission – In an attempt to influence your decision to invest, a broker may leave out pertinent information or mislead you about the opportunity.
Negligent portfolio management – A stockbroker who ignores or fails to keep watch on an investment account operates negligently. Being careless or incompetent with someone’s investment portfolio demonstrates negligence, and a California stockbroker fraud lawyer can help hold such brokers accountable.
These are just a few of the most common types of stockbroker misconduct. While many stockbrokers are honest individuals, there are also a significant number who are not. If you have encountered a dishonest stockbroker who has taken advantage and cost you significant losses, you may be entitled to compensation to recover your money.
If a stockbroker has defrauded you, you have legal options. We provide free consultations in a friendly, low-pressure environment. Speak with a California stockbroker fraud attorney by calling 800.931.8452.
What to Do if You’re a Victim of Stockbroker Fraud
If you have been a victim of stockbroker fraud, there are several options you may have to seek recovery of your investment losses. The option most commonly chosen by wronged investors is arbitration with the Financial Industry Regulatory Authority (FINRA). You also may be able to sue the stockbroker and their brokerage firm in court. In some situations, negotiating a settlement through mediation may be an option if both sides agree to it. When you work with our stockbroker fraud attorneys, our team will explain the legal options to recover your loses and will be alongside you at every step in the process.
Recover Your Stock Losses in FINRA Arbitration
FINRA is responsible for reviewing stockbrokers’ and brokerage firms’ conduct. If FINRA hears your case in arbitration, you may be able to hold your stockbroker accountable with FINRA’s help. After arbitration, you may recover some or all the financial losses experienced at the hands of a fraudulent broker. You might also recover compensation for the other effects that such losses have had on your life.
Our Stockbroker Fraud Lawyer in California Explains the Process
Here are some basics about how the arbitration process through FINRA works. Arbitration is mandatory among all brokerage firms and financial advisors registered with FINRA. Arbitration is similar to a civil trial, except that you go before an arbitrator or arbitrators instead of a judge or jury. If you’ve lost less than $100,000, your case will come before a one-panel arbitrator. If your losses exceed $100,000, three arbitrators will hear your case and decide the outcome. During arbitration, you and your attorney will present evidence to the arbitrators, as will the respondent, who is the person and/or firm you are making the claim against. The arbitrators will review all the evidence and make a decision. Arbitration decisions that FINRA makes are binding, so they cannot be appealed.
If your arbitration case is successful, your broker will have to repay some or all of your stock losses within 30 days of the arbitration decision.
As set forth in FINRA Rule 12206, you have a maximum of six years from the date of the event or occurrence giving rise to the claim (i.e., the stockbroker fraud) to initiate an arbitration claim. Because time is a factor, it’s important to keep watch on your accounts and to flag any suspicious activity as soon as it’s noticed. By speaking with a stockbroker fraud lawyer in California as soon as you suspect fraud, you can minimize your losses and prevent long-term schemes from growing.
Reasons to Work with Stockbroker Fraud Attorneys in California
If FINRA’s arbitration process is designed to hold fraudulent brokers accountable, you may be wondering why you need a California stockbroker lawyer. If you’ve lost money, you may be hesitant to hire a law firm and be unwilling to pay legal fees. It’s true that you are not required to hire legal representation. However, working with a California stockbroker fraud attorney will be beneficial and worthwhile for several reasons:
- Securities fraud is a very complex area of the law. Attorneys who understand how to bring these types of claims will know how and where to investigate for evidence in order to prove fraud to the arbitrators.
- You can be sure that the stockbroker and brokerage company you have filed a claim against will have their own skillful attorneys representing them. Working with our stockbroker fraud attorneys in California levels the playing field.
- Our attorneys work on a contingency basis. So, we get paid only if we recover finances for you.
Filing a Lawsuit to Resolve Your Stockbroker Fraud Complaint
If arbitration is not possible or there is no arbitration agreement, you may be able to file a lawsuit in court. Taking a stockbroker to court with the help of your California stockbroker fraud lawyer may be necessary if your broker is unregistered and cannot use FINRA arbitration. However, some brokerage firms require that investors sign arbitration agreements, meaning that arbitration, and not the court system, must be used to settle disputes.
When you go to court, both sides will present their evidence just as they would in arbitration; when all the proceedings are complete, the court will make a ruling on the case. You could be awarded your money and additional compensation, depending on the circumstances, or the ruling could go against you. If you don’t win in trial court, you may be able to appeal to a higher court. Of course, if the ruling goes against the broker and brokerage firm that you are suing, they can also appeal the case, which will further delay obtaining compensation for your losses.
By speaking with our California stockbroker fraud attorneys, you can learn more about your best avenue to take. While many cases are resolved through arbitration, our legal team has the resolve and experience needed to take cases to trial. We fight hard to ensure that investors and their families who have been cheated out of their finances can recover as much as possible.
Mediation and Settlement Negotiations in Stock Fraud Cases
Whether your claim goes to arbitration or to court, a settlement attempt may be made at some point in the process using mediation. Mediation is a process whereby a neutral third party helps two opposing sides reach an amicable settlement. FINRA, for example, offers mediation in order to try and resolve disputes before going to arbitration. In some cases, judges can order two sides to try mediation before taking a case to court. In either event, our stockbroker fraud lawyers in California can help you attempt to reach a fair settlement during negotiations.
If you are interested in learning more about which legal options are available to you after suffering devastating investment losses, reach out to our dedicated investment fraud lawyers at Wolper Law Firm. Call 800.931.8452 or complete the contact form below to schedule your free case review. We understand how difficult it is for you and your family to lose your retirement or other savings to fraud. And that’s why we work so hard to make sure that good people like you are not at a loss when facing broker fraud.
Your financial well-being depends on your investment portfolio. If you’ve lost money at the hands of a fraudulent stockbroker, our stockbroker fraud attorneys in California want to help make things right.
Frequently Asked Questions About Stockbroker Fraud
Get Answers from Our California Stockbroker Fraud Lawyers
It is often nothing short of shocking to learn that a broker whom you hired and trusted has been deceiving you in order to make more money. When you’ve been the victim of a dishonest stockbroker’s schemes, you probably have many questions about the situation and about your legal options. Our California stockbroker fraud lawyers can address some of the most common questions that we receive from wronged investors. For answers to your individual questions and concerns, reach out to our law firm today.
Is stock fraud a felony? The answer to this question is yes, it can be. Stock fraud, which is considered a “white collar” crime, may be prosecuted either as a felony or a misdemeanor, depending upon the circumstances involved. Stock fraud is often prosecuted as a federal crime, but it may also be prosecuted at the state level or at both the state and federal levels. People convicted of stock fraud may lose their broker license, pay civil penalties and hefty fines, and be sentenced to prison time in criminal cases. Under 18 U.S. Code Section 1348, people who commit criminal securities fraud may spend up to 25 years in prison for a single charge.
There isn’t a single agency that investigates fraud in the stock market. The U.S. Securities and Exchange Commission, which is the federal agency regulating the industry, investigates cases of stock fraud and may work with the Federal Bureau of Investigation (FBI) in criminal cases of stock fraud. State agencies also investigate stock fraud. FINRA’s Enforcement Department investigates alleged stock fraud and takes disciplinary actions against stockbrokers and brokerage firms that are determined to have committed fraud.
When you believe your broker has committed fraud against you and cost you substantial money, we can help you determine what steps to take to potentially recoup your losses and hold the broker and their firm accountable. Call Wolper Law Firm today to speak with an experienced stockbroker fraud lawyer in California by dialing 800.931.8452.
If you’re already the victim of stockbroker fraud, you should hold a fraudulent broker accountable using FINRA arbitration or filing a lawsuit against your broker. If you’re unsure if fraud is occurring but suspect that it is, carefully monitor and document your investment portfolio and accounts. Keeping a close eye on your accounts is one of the best ways to quickly detect fraud and prevent more losses. Our California stockbroker fraud attorneys can review your accounts to help determine if fraud has occurred.
Pay attention for red flags during interactions with your broker. Do they offer you low-risk, high-reward investments that seem too good to be true? Do you feel as if they are trying to rush or pressure you into investing in a particular stock or mutual fund? Or is the investment they are presenting to you so complicated that you can’t understand it? These can all be signs that your broker is acting fraudulently.
When you are looking for a new stockbroker and brokerage firm, you can get licensing and other background information by visiting FINRA BrokerCheck and the U.S. Securities and Exchange Commission website.
Markets and investments are volatile. Therefore, you will need convincing evidence in order to demonstrate to arbitrators and judges that stockbroker fraud has occurred. It’s important to gather potential evidence like account statements, notes about conversations with your broker, text messages, emails, witness statements, and other evidence. Our stockbroker fraud lawyers in California can help to review and use this evidence to build a fraud case.
Proving broker and brokerage fraud is a very complex undertaking. Any brokerage firm or investor will have their own attorneys who are knowledgeable about markets and about defending brokers against fraud accusations. So, make sure that you level the playing field by having your own stockbroker fraud lawyer in California on your side. Our team will review all evidence and build a strong case to help you recover financial losses.
Why Should I Choose Your Law Firm to Handle My Stockbroker Fraud Claim?
When you choose the Wolper Law Firm to handle your stockbroker fraud claim, you can be assured that you will work with stockbroker fraud attorneys in California who have extensive experience handling investment fraud cases. Our team provides exceptional service, has a great track record, and has decades of experience:
- Our attorneys have a combined 30 years of experience in securities, both bringing claims for defrauded investors and, previously, defending brokerage firms and their stockbrokers accused of fraud. Our versatility means that we understand how brokers think and we know the strategies that brokerage firms use. This insider knowledge is helpful when countering an accused broker’s defenses and presenting a convincing argument during arbitration or court.
- We are proud of our track record of success—we have recovered our clients’ money in over 95% of cases.
- We provide personalized and responsive service. You can reach us seven days a week.
- We are proud members of PIABA, an international bar association whose members are committed to representing investors disputing brokerage firms, investment advisory firms, and other securities companies and brokers.
- We practice nationwide, so no matter where you live, our stockbroker fraud lawyers can help you take your claim to FINRA arbitration.
If you’re still not certain whether you should contact us, you have nothing to lose by doing so. We provide free, no-obligation consultations in a low-pressure environment. Should you decide to hire our firm, know that our stockbroker fraud lawyers work on contingency, which means you don’t pay us anything unless we recover financial losses for you.
Contact Our California Stockbroker Fraud Attorneys for a Free, No-Obligation Consultation
It can feel overwhelming and intimidating to pursue arbitration or other legal action against a broker you believe is conducting fraud. But unless you do so, you may not stand a chance to ever recover your investment losses. Failing to do so could significantly hurt your future goals and your retirement plans.
When you work with Wolper Law Firm, our responsive stockbroker fraud lawyers in California will seek to make the process as low stress for you as possible. We will provide one-on-one guidance and be at your side to guide and represent you throughout the proceedings. And since we work on a contingency basis, if we do not recover money for you, you owe us nothing.
Your initial consultation is always free. Give us a call today at 800.933.8452 to learn how we can help you.