When Can an Investor File a Lawsuit Against a Broker, Financial Planner, or Investment Advisor?
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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
Many investors rely upon guidance from financial professionals, such as financial planners and stockbrokers, when buying or selling stocks, saving for retirement, or building up portfolios. If an investor incurs monetary losses because his or her financial advisor engages in fraud or acts with negligence, the investor may be able to bring a lawsuit against the brokerage firm or individual broker. If the investor can prove that the financial advisor’s fraudulent or negligent conduct caused financial losses, the investor may be able to recover compensation, or “damages.” Continue reading to hear an experienced financial negligence lawyer discuss some common scenarios that could lead an investor to sue his or her financial planner or stockbroker. If you believe that any of these scenarios apply to you or a loved one, you should discuss your legal options with an attorney as soon as possible.
Can You Sue Your Financial Advisor or Stockbroker for Losing Money?
As is the case with most legal questions, the answer is that it depends on the specifics of the situation. Generally speaking, it is possible for an investor to sue his or her financial advisor if the investor loses money due to the advisor’s fraud or negligence. However, due to the complex financial regulations affecting securities fraud cases, such as Financial Industry Regulatory Authority (FINRA) regulations, U.S. Securities and Exchange Commission (SEC) regulations, and additional state and federal laws, proving fraud or negligence is seldom a simple task.
On the contrary, investors must use detailed financial evidence to establish that certain facts are true. These facts are that:
- The financial professional owed a duty of care to the investor. Brokers and advisors have a fiduciary duty to their clients, and are bound to the regulations established by FINRA and the SEC.
- The financial professional breached their duty. In the next section, our Ponzi scheme lawyers will discuss some common ways this occurs.
- The investor sustained financial losses as a result of the financial professional’s breach of duty.
It may be possible to sue a broker or financial planner several years after the event which caused the financial harm. Depending on the nature of the case and where the lawsuit is being filed, different “statutes of limitations,” which create rigid time limits, could apply. Therefore, it is essential to consult with a breach of contract attorney as soon as possible if an investor suspects that fraud or negligence has occurred.
What Are Some Common Examples of Financial Negligence and Fraud?
Stockbrokers and financial advisors are valued by investors for their sophisticated understanding of the financial industry. Unfortunately, some advisors use their knowledge to make a profit for themselves – often by deliberately going against the instructions, and best interests, of the investor. In other cases, financial planners unintentionally make careless mistakes, exposing the investor to preventable financial harm.
When a financial advisor or stockbroker intentionally lies, conceals or misrepresents data, or tampers with records for personal financial gain, it is called “securities fraud,” with the term “securities” referring to options, stocks, and bonds. Some common examples of securities fraud include:
- Ponzi Schemes – In a Ponzi scheme, financial advisors pay existing investors using funds taken from new investors, typically luring investors in by promising low risks and high returns.
- Trade Churning – Trade churning is the practice of making excessive trades, typically by day trading, in a customer’s account for the purpose of earning commissions. A trade churning attorney can help you determine if harmful, excessive trading has occurred in your account.
- Unauthorized Trading – As the name implies, unauthorized trading is the practice of trading without the investor’s permission. Unless an investor authorizes the broker to use his or her discretion, brokers are generally required to obtain permission prior to making trades. You should contact an experienced unauthorized trades lawyer for assistance with this type of claim.
- Unsuitable Investments – An unsuitable investment is an investment made in contradiction to the investor’s personalized investment profile. For example, if an investor is inexperienced and wants to start cautiously by exploring low-risk investments, a high-risk investment would be considered “unsuitable” if financial losses result. If you think your broker made inappropriate investments that went against your instructions, you should discuss the resulting losses with an unsuitable investments attorney.
When an advisor causes financial losses by acting carelessly and failing to meet established standards, it is called “financial negligence” or “stockbroker negligence.” There are numerous ways a broker or financial planner can act negligently, such as:
- Failing to conduct certain trades.
- Failing to meet deadlines.
- Failing to inform investors of the risk associated with a particular investment.
- Failing to perform due diligence.
FINRA Arbitration Attorneys Representing Investors
If you sustained major financial losses because your financial planner or stockbroker lied to you, withheld information, acted without your permission, or made careless errors, you may have been the victim of fraud or negligence, and could be entitled to compensation for your losses. If you or your business suffered because your financial planner broke the law, the FINRA arbitration attorneys of Epperson & Greenidge, LLP are ready to litigate aggressively to maximize your recovery. Where appropriate, we can also help you explore alternative options for dispute resolution, such as mediation and arbitration.
Even if you are not sure whether you have a case, we urge you to contact the law offices of Epperson & Greenidge, LLP online, or by calling (877) 445-9261, for a free legal consultation. If we believe you have a case, we can help you start exploring your options for pursuing compensation.