Not all losses in brokerage accounts are the responsibility of the brokerage firm. Investments do involve some amount of risk. Following are the typical claims for which the broker can be held liable: Unauthorized trading; Unsuitability / Inappropriate Investments; Churning Accounts; Misrepresentations Unauthorized Trading: Unless your financial professional has your written authorization to make trades in your account, he or she must obtain your approval before buying or selling any investments. If you learn that purchases and/or sales occurred without your prior knowledge, then you may have a claim for any losses you incurred as a result. Unsuitability / Inappropriate Investments: Yes, investments carry some level of risk. The question is, how much risk were you willing to take? It is your broker's responsibility to find this out before beginning an investment strategy. Along with determining your risk tolerance, your financial professional should know your investment goals and desires, your intended use of the funds, and the time span that will occur before you need the invested money. Finally, your advisor should conduct a lengthy interview with you to learn about your net worth and income. If your investments do not match your investment profile, then you may have a claim for any losses you incurred in your account. Churning Accounts: Brokerage firms typically make money when they buy and sell stocks, bonds, mutual funds, and other products. Investors typically make money when they buy investments and hold them. Buying and selling incurs fees that go to the firm - not the investor. If your broker has recommended that you buy and sell your stocks often, you may have a claim for the losses you incurred as a result. Misrepresentations: Financial Professionals are sometimes pressured by their firms to sell certain investment products to their clients - regardless of whether it is an appropriate investment for the client. They sometimes obtain the client's consent by lying to the client about the nature of the investments. If you feel like your broker has lied to you, you may have a claim for the losses you have incurred. |
