Common Claims
Claims under which investors can recover their losses and other damages include: |
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A. Suitability. Prior to recommending the purchase of specific investments to a customer, a stock broker is required to determine that the investments are suitable to that particular investor. A suitability determination is based upon many different factors such as age, investment objectives, employment situation, needs, income, assets, and investment experience. If a stock broker's recommendations of unsuitable investments result in the investor incurring significant losses, that investor may have a suitability claim against the broker. B. Churning. Churning occurs when a broker exercises control over an account and allows the broker's interest in making commissions to override the investor's interests in the account. When a broker makes a buy or sell recommendation for an account, that broker should have the investor's best interests based on their investment objectives in mind. If the broker makes excessive buy and sell recommendations for the purposes of generating commissions for the broker by each buy and sell, that broker is engaged in churning the account. Excessive turnover in the assets of the account is often a sign of churning. C. Unauthorized Trading. Generally, an investor can have two kinds of an account, non-discretionary and discretionary. In a typical non-discretionary account, the broker must consult with and obtain the consent of the customer prior to making a trade in the account. Unauthorized trading occurs when a broker makes trades in a non-discretionary account without the consent of the customer. D. Securities Fraud. Most of the claims in this list are subsets of securities fraud which is employing a device, scheme, or artifice to defraud, or obtaining money by means of untrue statements of material facts and failure to state material facts in violation of federal law (Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5) and state law. If a broker makes false statements to an investor or fails to advise the investor of certain important facts, the investor may be able to recover losses incurred resulting from this fraud. E. Margin Disputes. Margin trading involves borrowing money from the brokerage firm to purchase securities greater in value than the equity in an investor's account. Due to the risky nature of trading on the margin, disputes with brokers often arise as a result of significant losses. If a broker trades on the margin without the knowledge or consent of the investor, the investor may be able to recover the losses resulting from the fraud. Obviously, this list is by no means comprehensive and all of the legal requirements of the above claims stated are not completely set out. This web site is not intended to give legal advice or create an attorney-client relationship. If you think you may have a claim, please contact us for a free consultation. |