Fighting for Investors
The Securities Fraud Lawyers at Greco & Greco, P.C. regularly represent residents from California and across the country in disputes with their financial advisors and securities salespersons, involving claims of suitability, violations of FINRA Rules, negligence, fraud, misrepresentation, ponzi schemes, violation of SEC Regulation Best Interest, breach of fiduciary duty, professional malpractice, and other claims. Please contact Scott Greco for a free attorney consultation about your case. We serve clients from all areas of California, including Los Angeles, San Francisco, San Diego, San Jose, Fresno, Sacramento, Long Beach, Oakland, Bakersfield, Anaheim, Santa Ana, Riverside, Stockton, Irvine, Chula Vista, Fremont, San Luis Obispo, Santa Barbara, Paso Robles, Monterey, Santa Cruz, San Bernardino, and Modesto.Decades of FINRA Arbitration Experience
If an individual investor has a dispute with a FINRA brokerage firm or stock broker, he/she most likely will have to arbitrate through FINRA's Dispute Resolution system. FINRA Arbitration holds arbitration hearings in three California cities, San Francisco, Los Angeles, and San Diego.Contingency Fees for Harmed California Investors
We understand that many of our clients cannot afford to hire an attorney because they have lost a large portion of their life savings at the hands of a trusted financial advisor. Our attorneys regularly represent harmed California investors charging only a contingency fee. This means that our clients do not have to pay any attorneys fees up front, and only pay us out of monies recovered in your case.California Securities Regulator and California Securities Act
The California Broker-Dealer and Investment Adviser Division (BDIA) is a division of the California Corporations Commissioner which regulates broker-dealers, broker-dealer agents, investment advisers, and investment adviser representatives in California pursuant to the Corporate Securities Law of 1968. Its website (https://dbo.ca.gov/broker-dealers-state-investment-advisers-and-sec-investment-advisers/) provides information on state securities Statutes and Rules, and information on how to file a complaint.
California’s Securities Act is similar to many states' Acts with regard to providing for civil liability for the commission of securities fraud in the sale of securities (including untrue statements of material fact or omissions of material fact). The statute provides for rescission (or damages if the investor no longer owns the security) and interest.
Common Legal Claims by California investors against their financial advisors
- Suitability / Regulation Best Interest. Prior to recommending the purchase of specific investments or a specific investment strategy to a customer in California, 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, risk tolerance, employment situation, needs, income, assets, and investment experience. If an advisor’s recommendations of unsuitable investments result in the investor incurring significant losses, that investor may have a suitability claim against the broker and his/her firm. Regulation Best Interest, also known as Reg BI, is an SEC Regulation that now governs recommendations of securities and investment strategies by financial advisors. All such recommendations must be in the investor's best interest.
- 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 and/or a high cost to equity percentage are often a sign of churning.
- 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.
- 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 the California securities laws or federal law (Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5). 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.
- 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. Margin Strategies if recommended must be in the investor's best interest.
- Ponzi Scheme Investment Scams. Ponzi schemes generally involve promises of high returns by salespersons over short periods of time, but in reality result in stealing from Peter to pay Paul. Because returns to investors in ponzi schemes are often paid out of new investment monies from new investors, the scheme will ultimately fall apart when the new investors dry up, leaving all investors often holding a worthless investment. Financial Advisors and their brokerage firms who sell ponzi scheme fraudulent investments may be found liable for selling unsuitable investments, securities fraud, sale of unregistered securities, failure to supervise, and other legal violations.
- Failure to Supervise Broker. FINRA firms have a duty to supervise their registered brokers, and their failure to do so may form the basis of various legal claims against them. NASD Rule 3110 states: Each member shall establish and maintain a system to supervise the activities of each registered representative, registered principal, and other associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA Rules. Final responsibility for proper supervision shall rest with the member.
Examples of legal grounds for liability of Broker-Dealers in these situations include:
- Under tort and agency law, principals can be found liable for the acts of their agents even if they are entirely innocent and have received no benefit from the transaction;
- A broker's Broker-Dealer can also be found liable as a control person of that broker under California and federal securities laws; and
- Claims can be pursued in arbitration based on violations of FINRA rules including Rules related to supervision, suitability, and outside business activities.
Please contact our California securities fraud lawyers for a free consultation if you are a California resident and believe your financial advisor or broker may be liable under one of the above claims, or for other wrongful conduct.
Greco & Greco Blog Posts Regarding California Financial Advisors:
California Edward Jones Advisor Suspended for Customer Loans