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 their stockbroker’s fraudulent actions.
There are many different ways that brokers, and the financial institutions that employ them, can take advantage of investors for their own financial gain. Read on to learn more about some common types of stockbroker fraud and what you should do if you have suffered considerable losses on the stock market that you believe may have been due to misconduct.
Common Stockbroker Fraud Schemes
The complexity of the financial markets help brokers disguise your losses as unavoidable risks you took by investing. In reality, the broker is defrauding you. Below are several types of schemes our Illinois stockbroker fraud lawyers 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 – You should be able to trust that your brokerage firm or financial institution is monitoring their staff for fraud, given how frequently it occurs within the industry.
Selling away – Selling away occurs when a broker sells securities to a client that have not been approved by the brokerage firm. Often times, 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, or making an excessive number of trades in an investor’s account, generates high commissions for the broker and can cause massive investment losses.
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 – You turn to a stockbroker because they are supposed to be the experts who understand the markets. But when the professional you trusted is careless or incompetent in managing your portfolio and you suffer large losses, they may be held responsible for their negligence.
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.
Speak with an Illinois stockbroker fraud attorney to discuss the individual details of your case and learn what legal options are available to you. We provide free consultations in a friendly, low-pressure environment.
How Can I Get My Money Back from My Stockbroker?
Take Your Case to FINRA Arbitration
Most claims involving stockbroker fraud are resolved through FINRA arbitration. The reason for this is that the majority of brokerage firms have binding arbitration clauses in their customer agreements. To start the process, you file a statement of claim for arbitration with FINRA, which will then be served on your broker and/or their firm.
Your claim should clearly describe the alleged broker fraud and include how much money you are seeking to recover. Any documents you have that show evidence of the fraud should also be included. One of our Illinois stockbroker fraud lawyers can prepare and value your claim, identify appropriate evidence to include and handle the filing process with FINRA.
FINRA arbitration claims are heard by one or three arbitrators, depending on the amount of money involved. Like a court trial, arbitration typically involves both sides presenting evidence and arguing their cases in a hearing, although in simplified cases decisions may be made without a hearing. Once both sides have made their cases, the arbitrators will review all the evidence involved and make an award decision. FINRA arbitration decisions are binding and cannot be appealed.
However, according to FINRA statistics, most claims that go to arbitration settle and result in compensation for investors before they reach the award decision stage. Once you receive an award or settlement, the broker/brokerage firm has 30 days to pay you. If the broker or their firm does not pay you within this timeframe, they may have their registration canceled or revoked by FINRA.
The arbitration process can be complex, especially in cases of high-dollar claims. An Illinois stockbroker fraud lawyer can guide you throughout the entire process and represent your interests before arbitrators.
How Our Illinois Stockbroker Fraud Attorneys Will Help You in Arbitration
Our Illinois stockbroker fraud attorneys have a greater than 95% recovery rate for wronged investors. When we handle your FINRA arbitration claim, we will do the following to help you recover your money:
- Identify and gather all the evidence
- Prepare all the paperwork and file the claim with FINRA
- Build the strongest case possible against the broker and/or brokerage firm
- Question witnesses and argue your claim before arbitrators
- Answer your questions and advise you throughout the arbitration process
- Handle all the legal steps necessary to help you recover your money
Contact Wolper Law Firm, P.A. today at 800.931.8452 to arrange a free consultation.
Sue Your Stockbroker in Court
For investors who are not bound by arbitration, suing in court is another possible option if you have evidence that a broker’s fraud or negligence caused your investment losses. Lawsuits may either settle or go all the way to the trial phase. Our hardworking litigators always thoroughly prepare cases as if they are going all the way to trial, even if settlement is a real possibility. We are always ready, willing and able to fight for your interests before a judge or jury. Speak to an Illinois stockbroker fraud lawyer about whether filing a lawsuit may make sense based on the circumstances of your case.
Learn Your Options from a Stockbroker Fraud Lawyer in Illinois
If you are interested in learning more about what legal options are available to you after suffering devastating investment losses, reach out to a dedicated investment fraud lawyer at Wolper Law Firm, P.A.. 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. We will fight for your rights and interests throughout the legal process. Our Illinois stockbroker fraud attorneys provide free consultations, so you have nothing to lose by speaking with us. We also work on a contingency basis, so we get paid only if we get you recovery.
Turn to An Illinois Stockbroker Fraud Attorney. We Are Committed to Helping You Get Recovery When Your Financial Well-Being Is at Stake.
Frequently Asked Questions About Stockbroker Fraud
Get Answers from Our Illinois Stockbroker Fraud Lawyers
Sometimes investors who lose money to fraud may feel embarrassed that they fell victim to an unscrupulous broker. They may feel they should have recognized what was happening and should not have allowed themselves to be taken in. But the securities industry is extremely complex, which can make it easy for brokers to bamboozle clients and commit fraud. The following Q&A section discusses ways that investors can recognize whether their brokers are committing fraud against them.
If you’ve already been defrauded by your broker, you can prevent future fraud by holding them accountable through FINRA arbitration or a lawsuit. If you aren’t sure whether fraud is taking place and want to prevent it from happening, there are several things you can do, starting with regularly reviewing your account statements. People who don’t pay careful attention to their statements are most often the investors who are victims of fraud. Look for frequent activity, activity you don’t understand, or activity that you haven’t approved in a non-discretionary account.
Pay attention; watch 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. If you have lost a large amount of money and believe your broker is doing something underhanded, reach out to a stockbroker fraud lawyer in Illinois. We will work diligently to discover the truth.
When you are looking for a broker, don’t be afraid to ask them questions about their background. Ask about their licensing and certifications, their education, how long they have worked in securities and for whom, and how they charge for their services. Additionally, for any brokers you are considering, you can check out their backgrounds and that of their brokerage firms by visiting FINRA BrokerCheck and the U.S. Securities and Exchange Commission website. These websites provide information about licensing, how long a broker has been licensed, and whether they have been disciplined or have had any claims against them.
You have six years from the date that the events occurred that gave rise to the claim of stockbroker fraud to initiate a FINRA arbitration claim. If your investment agreement did not include a binding arbitration clause and suing in court is an option, how long you have will be determined by the state or federal statute of limitations. What that statute of limitations is can depend on when you discovered the fraud and other factors.
As soon as you notice issues with your investment accounts, you should contact an attorney to learn about your options for recovery. Don’t risk running out of time to initiate a claim and have a chance of getting your money back. Contact an Illinois stockbroker fraud lawyer from Wolper Law Firm, P.A. today to schedule a free consultation.
Whether your case goes to arbitration or civil litigation, you’ll need powerful evidence to persuade the arbitrators or judge that you were defrauded by your stockbroker. Evidence could include account statements showing transactions, written notes about in-person or telephone conversations with your broker, emails, text messages, witness statements and other things. As soon as you suspect you are losing money to broker misconduct, reach out to an Illinois stockbroker fraud lawyer who will examine the evidence and advise you of next steps.
Proving broker and brokerage fraud is a very complex undertaking. The brokerage firm will have legal counsel representing them who are highly knowledgeable about stock market investing and highly experienced at defending brokerage companies from fraud accusations. To have the best chance of success, you will need your own well-versed stockbroker fraud attorneys on your side. Our team will identify and gather the evidence to build the strongest case possible.
Speak with A Well-Qualified Illinois Stockbroker Fraud Attorney. We Are Standing By to Provide a Free, No-Obligation Consultation.
Although you may feel overwhelmed at the thought of pursuing arbitration or other legal action, unless you do so you may not stand a chance to ever recover your investment losses, which may greatly affect your retirement or other future plans and goals. When you work with Wolper Law Firm, P.A., our responsive Illinois stockbroker fraud attorneys 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.
Your initial consultation is free. And if we don’t win your case, you pay nothing, because our stockbroker fraud attorneys in Illinois work on a contingency basis. Give us a call today at 800.931.8452 to learn how we can help you.
Attorney Matthew Wolper
Matt 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.
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