Hiring a stock broker amounts to finding someone you trust who can help your future financial security and stability. Market forces normally control losses and gains in personal portfolios, but sometimes the losses can be extensive. If the portfolio is not moving consistently with the market, then the possibility exists that the broker is misinformed, weakly qualified or dishonest. There are some methods to determine dishonesty. One of the best ways is knowing the informational and fiduciary responsibilities of the broker to the investor. There are some legal remedies for those who have been the victim of investment fraud, especially if the broker needs the investor’s authority to make any transaction.
Assess Your Brokerage Activity
It is important to be active in reviewing the status of all personal investments on a very regular basis. Do not be too eager to trust. Researching investment advice from your broker can reveal the existence of faulty investment information or advice. According to our security fraud attorneys, brokers are legally bound to honestly provide specific information for all investment clients and this includes effective and accurate explanations of risk assessment for any investment. Investors that encourage investments in high risk ventures after having consistently been a conservative investment strategist could easily be a red flag for possible conflict of interest.
“Unauthorization” and Hyperactivity by the Broker
It is always a good idea to require the broker to receive investment approval before actually moving on a stock. Stock purchases can be time-sensitive, but long-term investment strategies do not often include selling short. If the broker is over-active with certain authorized trading, then more investigation is needed. It could signal “put option” placement for a broker that is effectively betting on certain investments to fail. This was a major component to activity that encouraged the banking collapse of 2008 and has been addressed by the Securities and Exchange Commission in the Dodd-Frank Act. When an agent has been unethical or dishonest there is always a basis for a civil claim, but there may also be criminal penalties involved.
Egregious Misrepresentation
Embezzlement can occur easily when the client is much too trusting of their broker. The Bernie Madoff Ponzi scheme is a prime example of the possibilities for fraud and embezzlement. Never give any stock broker carte blanche authority to invest your financial resources because they are yours and not his. Taking responsibility for monitoring your own financial stability can help guard against criminal behavior from your broker. Other individuals may be having similar problems with the same brokerage firms.
Any individual with a significant investment portfolio should have a securities fraud attorney and a certified public accountant on retainer in some form. A CPA can help immensely in evaluation of accounting issues and potential illegal activity. Additionally, the Sarbanes-Oxley Act established a non-profit corporation under the authority of the Securities Exchange Commission to field complaints from defrauded investors regarding unprofessional and possibly illegal activity on the part of their personal investment brokerage. Many times these issues concern many investors and the fraud occurs systemically, requiring class action suits against multiple respondents and usually ending in some form of trust settlement. Settlements essentially preclude any admission to guilt and can let the broker off of the hook in many cases, but the lost funds can possibly be recovered from the brokerage firm in addition to personal claims against the agent. An experienced securities fraud attorney will know how to go about legal recourse.
Chris Bennett is a freelance writer and contributing author for the Atlanta-based security fraud attorneys of Page Perry, LLC. If you feel you’ve been the victim of securities fraud, be sure to contact a reputable attorney to ensure your rights are protected. Page Perry’s lawyers place an emphasis on the trial and arbitration of securities claims.
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