Securities Fraud / Stock Broker Fraud
The relationship that you build with your broker or brokerage firm is extremely important. You trust these professionals with your futures. While there are many strict rules that govern the ways these brokers are allowed to manage your assets, there are many occasions in which these rules are ignored and you hard earned money is unlawfully put at risk.
The rules that brokers must follow are called Suitability Rules. Both the National Association of Securities Dealers (NASD) and the New York Stock Exchange (NYSE) have Suitability Rules which are designed to regulate the brokers and protect your assets.
The NASD Conduct Rule 2310 and the NYSE rule 405 both state that the broker should have “essential” or “reasonable” information about a client before making any investments for them, and that if they don’t have enough information about that client, they should use “reasonable efforts” or “due diligence” to get it.
For example, the broker should ask you about:
- Your financial status
- Your tax status
- Your investment goals
Because different people have different answers to these questions, this enables your broker to make appropriate decisions that match your situation and preferences. The Suitability Rules require that the broker try to get it from you before starting on any investment activity.
Unauthorized Transactions
In general, any transaction or trade that you broker makes should only be done with your approval. While things can be sped up by signing a written discretion or discussing general guidelines for your broker's activity, you can’t simply give verbal approval for your broker to make any and all future transactions.
What is securities fraud?
Whether a brokerage firm, a group of investors or a private investor, securities fraud is when a party attempts to manipulate the market through the use of certain unlawful tactics.
The stock market is a risky business and there are certainly no guarantees. Losing money on an investment does not mean that your broker committed an act of fraud. While fraud certainly does occur from time to time, market trends and conditions are usually the reason for losing money.
Some examples of securities fraud
- Churning
- Unauthorized trading
- Failure to diversify
- Breach of fiduciary duty
- Annuities Fraud
- Margin trading losses
- Stock market trading losses
- Mismanagement of accounts
If your investments were mishandled, you may have the right to receive monetary compensation for your injuries. For a free case evaluation, fill out the form below:
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