Investment Fraud and Broker Fraud in Southern California

There are laws written specifically to protect investors from unscrupulous brokers and investment advisors. You may have a broker fraud claim and a right to monetary recovery if your funds were mismanaged by a stockbroker or investment advisor. Most of these claims against brokers and brokerage firms must be resolved in FINRA arbitration because brokerage firms generally have investors sign binding arbitration agreements prior to open their accounts.

Common forms of broker fraud include:

1) Misrepresentations or Material Omissions

A broker owes a fiduciary duty to their client to disclose the risks associated with a particular investment. If a broker omits or misrepresents material facts about an investment which results in their client losing money on that investment, the broker or brokerage firm may be held liable.

2) Unauthorized Trading

A broker must obtain express authorization from an investor before buying or selling securities on their behalf. Without this authorization, the broker or brokerage firm may be held liable for any losses incurred.

3) Unsuitability and Margin Accounts

A broker has an obligation to ascertain their clients risk tolerance, and make investment recommendations commensurate with their particular needs and desires. When a broker makes unsuitable recommendations and money is lost as a result of it, the broker or brokerage firm may be held liable. One example of unsuitability could be where a broker uses a margin account for an investor with low risk tolerance. In a margin account, a brokerage firm loans money to the investor. Using margin accounts, large amounts of money can be made or lost. This type of high risk investment is only appropriate for sophisticated investors with a high risk tolerance.

4) Lack of Diversification

A broker that puts all of its client's investments in an individual investment or type of investment, increases the risk to the client. If the investment loses money, the broker may face liability for not diversifying their client's portfolio.

5) Failure to Supervise

If a brokerage firm fails to supervise their broker, they may be held liable for any losses that a client incurs as a result of their lack of supervision.

6) Negligence

If the actions of your broker fell below the standard of care that a reasonable, prudent financial advisor would use in a similar circumstance, the broker or brokerage may be held liable for losses incurred.

At The Emge Firm, LLP, we represent individual investors who are victims of broker fraud and investment fraud in San Diego, Los Angeles and Riverside County. If you are such a victim, we are ready to help. For a free initial consultation and discussion of your options, including FINRA arbitrations, call 619-595-1400 or toll free 866-629-3409. You can also contact us online.