Securities and Stock Broker Disputes

Making investments in securities and stocks involves the risk of financial losses. When those losses occur as the result of market fluctuations, they are simply part of the investment dynamic. However, some investors face losses due to negligence or improper conduct on the part of their investment advisors. If a broker, brokerage house, fund manager, retirement plan sponsor, investment advisor, or financial planner did not act in the investor’s best interests, the investor may be entitled to file a claim for compensation.

The majority of brokers require their clients to sign an agreement to arbitrate any dispute. Accordingly, a three-person arbitration hearing is the common forum for most investors who file securities claims. If your investment advisor acted improperly under the law, and you are seeking compensation, it is critical to seek qualified counsel from a Florida securities lawyer. An experienced securities attorney will help you prepare for and evaluate your claim. To discuss your securities claim with a John Bales Florida securities lawyer, complete a FREE Online Consultation Form or call us toll free 1-800-CALL JOHN (1-800-225-5564) 24 hours, 7 days a week.

Most securities claims result from a financial advisor’s breach of fiduciary responsibilities to the investor. These professionals must fulfill that responsibility because they occupy a position of confidence and trust for their investors. There are eight common types of securities claims:

1. Churning (excessively trading) an account: Brokers do this to generate commissions off each trade. A broker with discretionary or practical (“de facto”) control over an account may trade with that account, for the purpose of getting larger commissions. This form of improper conduct is subject to claims under both federal and state securities laws.
2. Failure to execute or follow directions: A broker who has agreed to act as an investor’s agent is bound to execute the wishes of the investors. If the broker ignores instructions, or intentionally or negligently fails to execute an order, the investor may be able to file a claim. A substantial increase or decrease in the price of the security at issue must have occurred, meaning that the investor incurred financial damage, either through an unrealized gain, or by suffering losses.
3. Margin complaints: The margin is the amount that an investor must deposit with a broker when borrowing from the broker to purchase securities. The investor then pays interest on any money borrowed from the broker for the purchase of stocks. The NASD and NYSE require that the investor maintain at least 25% of the market value of securities in the margin account. A negligent broker may liquidate these margin assets, or fail to allow the investor to suggest when the assets should be liquidated.
4. Misappropriation: The broker may misappropriate an investor’s funds. For instance, the broker may not report a transaction to his employer, a practice known as “selling away.” The brokerage firm may not have knowledge of the transaction, or even of the client. The investor may have a claim against the brokerage firm, on grounds of respondeat superior, or negligent supervision.
5. Misrepresentations or omissions: This claim can be made when a broker intentionally or recklessly misleads an investor or fails to disclose material facts about an investment. This often occurs in “boiler room” situations, where a group of brokers “cold calls” potential investors using high-pressure sales tactics. The sophistication of the investor may be taken into account in rulings on this kind of securities dispute.
6. Negligence: A broker must use reasonable diligence in processing an investor’s account and act as a reasonable and prudent broker would behave. Malice or intent is not necessarily required in negligence claims, which are usually joined with another type of claim.
7. Unauthorized trading of investments: A broker’s making unauthorized trades in an investor’s account is fairly common. In non-discretionary accounts, the broker must have the broker’s knowledge or approval before completing any trades. If an investor has not given permission for a trade, either orally or in writing, and loses money as the result of that trade, the investor may be able to file a securities claim against the broker.
8. Unsuitability of recommendations or investments: If the broker makes recommendations that are unsuitable for the investor’s financial situation and objectives, and the investor loses money due to following the recommendations, the broker may be responsible for those losses. The investor’s level of marketing experience and financial strength are often considered in unsuitability claims decisions.

If you have suffered financial losses as the result of an investment advisor’s negligence, contact a John Bales Florida securities lawyer today. Complete a FREE Online Consultation Form or call us toll free 1-800-CALL JOHN (1-800-225-5564) 24 hours, 7 days a week.