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Did my investment advisor or stock broker commit malpractice?

Did my investment advisor or stock broker commit malpractice?

Frequently Asked Questions

Investment advisor or stock broker fraud can take several forms. Acts of fraud can include lying, stealing, or the failure to disclose material information about an investment. Malpractice can also include such things as failure to properly diversify an account (for example having too much of your money in a single investment or in a particular type of investment), failure to recommend the account be “rebalanced” as you grow older or market conditions change, recommending investments that are not truly suitable for your circumstances, or “churning” (frequent trading in order to generate fees and commissions for the broker).


When you make investments you place a lot of faith in your advisor or broker to look out for your best financial interests. Sometimes though you may begin to get the sinking feeling your account is being mishandled. Unfortunately, that is all too common these days, from brokers and investment advisors who commit malpractice, either by mishandling your money or even committing downright fraud.

Below we’ve identified several areas of potential concern that can help you determine if further investigation is required, or even when you may need to contact a securities attorney for help when one or more issues are raised.


Are The Investments Suitable For Me?


When you first met with your broker many questions were asked about your current and projected future financial situation, goals and objectives for investment, and current and projected needs, to name a few. A good broker needs to know this information so they can make suggestions and guide you to investments which best suit your individual needs both now and in the future.


When you look at your monthly account statements does the information presented match what you said? Does it correctly list your risk tolerance, investment goals and net worth for example? Do the types and percentages of investments on the statement meet your expectations from instructions and discussions with the broker? If not, then you should investigate further.


Communication With My Investment Advisor


It is in your best interest to review your monthly statements from your broker each month. Make particular note of each trade that occurred. All trades must be marked as “solicited,” meaning recommended by your broker, or “unsolicited.” Are there lots of unsolicited trades? Are some of them mis-marked? If you answered yes to either of these questions, you should investigate further.


In addition, did your investment advisor communicate with you prior to these trades? If trades are occurring without notice to you first, investigate further. Similarly, if you’ve requested to sell something, and your directions were not followed, investigate further. Finally, a big red flag should come up if your advisor calls you with a tip with “inside” information, since this is illegal.


Are My Investments Diversified Enough?


Make sure your investments are not overly concentrated in one or just a few things. Lack of diversification puts your investment at enormous risk, and should be avoided by investment advisors in almost all situations.


Has There Been An Excessive Amount Of Trading?


When you look at your statements, do you notice an excess amount of trading? Brokers often get a commission for each trade performed, and those investment advisors who commit malpractice often trade excessively to increase their own profits. If you’ve paid more than 5% of your account’s value in a year for commissions you may be a victim of “churning.”


Have I Been Contacted By The Investment Advisor’s Superior?


Even if you’ve not noticed any problems in the past with your investment advisor you definitely need to investigate further if you are ever contacted by their boss or the company they work for. Although they may say they’re just contacting you for routine purposes, this is generally an indication they they’ve identified something fishy going on with your account, even if you haven’t. Do not sign anything requested, and don’t try to defend your broker. Instead, in these situations you should contact a securities attorney to determine if you’ve been the victim of investment advisor malpractice or even fraud.


As a securities law firm, Starr Austen & Miller has handled these and many other forms of investment advisor malpractice. If you believe you have been taken advantage of, contact us right away. We can help you know if you have a legitimate securities fraud case.

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