What to Do if You Suspect Your Broker is Fraudulent
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As reported in InvestmentNews, three Raymond James entities have agreed to pay over $15 million to resolve an investigation by the SEC. The settlement and SEC order focused on Raymond James’s actions in improperly charging certain clients advisory fees when the...read more
Fraud is a problem in any industry, especially the financial industry. Classic fraud schemes like Ponzi schemes begin with a promise of an investment opportunity but often end with financial ruin and potential participation in a crime. Other schemes are subtler or may simply involve your broker taking advantage of you and your finances. In either case, there are some steps you can take to help confirm that suspicious activity on your accounts or in your broker’s work are fraud or bad practices. The FINRA arbitration lawyers at Epperson & Greenidge explain.
Signs of Fraud in Investments
One of the earliest signs of fraud in a relationship with a stockbroker, securities dealer, or financial advisor is the lack of disclosure. FINRA (the Financial Industry Regulatory Authority) and the SEC (Securities and Exchange Commission) create rules that govern what kinds of disclosures financial industry workers must make to their clients. These include information about their accounts and investments, fees, and conflicts of interest. Some of this required material, like conflicts of interest, could expose serious problems with your broker’s ability to give you good financial advice and could even amount to fraud. Some of these disclosures may be hidden in the fine print of materials you receive, and it is important to fully review these documents to look for signs of fraud.
Evidence that your broker is overstepping their boundaries is also potential evidence of fraud. Every broker usually has some sort of agreement or contract you sign with them laying out who makes which decisions, what fees are paid, and other details of the relationship. If your broker oversteps what the agreement allows them to do, they may be breaching the contract by performing unauthorized trades or mishandling your accounts.
Another indication of fraud goes hand-in-hand with unauthorized trades. Many brokers are paid for each transaction they perform on your account. While this is perfectly legal, it becomes a problem when brokers give in to the incentive to run-up your brokerage fees by performing excessive trades. This “trade churning” may end up costing you thousands, especially if the broker buys and sells the same investments over and over to accumulate fees.
If you think your broker-dealer may have done something illegal or fraudulent with your money, check their record. FINRA’s BrokerCheck shows your broker’s licensure, work history, and any record of official complaints against them. If they moved from job to job frequently or have a series of complaints and claims, that may be a good indication that your suspicions of fraudulent activity are correct. Even if this record is clean, they may have done something worthy of filing a claim against them.
Filing a Claim Against Your Broker for Fraud
If your broker or financial adviser took advantage of you or otherwise committed fraud using your investments, you may be entitled to compensation. There are multiple avenues to file claims against your broker for fraud or other errors. Many of these FINRA claims are available regardless of what your broker did to harm your investments.
In some cases, you may be able to take your case to court. However, appearing before FINRA for arbitration may be a better option. Going to trial in a court of law is often expensive and may ultimately cost you more than the overall value of your financial harm (or even the total value of your investments). Instead of going to court, you may be able to take your case straight to FINRA for arbitration.
Arbitration works very similarly to a lawsuit and ends in a binding decision that may include damages and compensation for investors who were victims of fraud or other financial negligence. FINRA has the power to bring any licensed financial advisor into court and can look to their own regulations to hold the financial industry professional accountable for bad practices like trade churning.
Mediation through FINRA is also available, though this may not be helpful in every case. Mediation, unlike arbitration, is nonbinding. This means that after you meet with your broker or financial advisor and a neutral third party, any decisions the mediator makes are mere suggestions and do not have force behind them. Additionally, either party can walk away from mediation, which makes arbitration a much stronger tool in many instances.
Free Consultations on FINRA Claims Against Fraudulent Brokers
Talk to an attorney today to discuss the possibility of filing a FINRA claim against your broker-dealer. Financial advisors and stockbrokers are held to high standards under FINRA rules, and breaching these rules can make them personally liable for the harms they caused you. For a free consultation on your case and to begin building a claim today, contact the FINRA claims lawyers at Epperson & Greenidge. Our number is (877) 445-9261.