Brokers build rapport and relationships with investors and encourage investors to trust them. Although brokers rely on that trust, there are always some who abuse it. Brokers often claim that they act in the best interests of their investors. In reality, however, some brokers induce investors to make purchase or sale decisions on the basis of misleading or incomplete information, which often results in financial losses for the investors.
If you were the victim of broker misconduct, it's important to know that it's not your fault. Working with an established law firm can help protect your rights and recover the losses you have suffered due to the unlawful conduct of others.
We Are Committed To Protecting Investors And Retirees
Mihalek Law, based in Lexington, Kentucky, is a nationally recognized securities litigation law firm. Our lawyers have more than 50 years of experience protecting investors and retirees throughout the country who were the victims of broker misconduct, including:
Churning: Churning refers to the excessive buying and selling of securities in your account by your broker, for the purpose of generating commissions and without regard to your investment objectives.
Unsuitability: Your broker has a responsibility to recommend investments based on your investment objectives and goals, as well as your appetite for risk, if any. If you don't want to make investments that place your principal at substantial risk of loss, they should not be recommended to you.
Overconcentration: If a broker concentrates your portfolio in any individual investment or type of investment, then the risk of losses with that portfolio may be dramatically increased. A financial adviser who does not diversify his client's portfolio is potentially liable if the portfolio declines in value.
Misrepresentations and omissions: Stockbrokers must truthfully disclose all material information, including the risks associated with the investments he or she is recommending. A broker's misrepresentations of and/or failure to disclose material information can constitute grounds for recovery of losses suffered as a result of the broker's misrepresentations and/or omissions.
Excessive markups or markdowns: Although there is no question that the broker/dealer is entitled to add a markup to the price it pays for the securities, the markup must be fair and reasonable. Whether that markup is fair and reasonable is determined on a case-by-case basis. A markup may be "excessive" when it bears no reasonable relation to the prevailing market price. We are seeing widespread abuse in the purchase and sale of bonds. Victims are often sophisticated, institutional-sized investors. The reason: undisclosed, excessive markups and markdowns.
Unauthorized use of margin: With a margin account, an investor can borrow money from the brokerage firm to purchase additional securities in his or her account. The loan from the firm is secured by the securities the investor purchases. Investors need to be aware that when they buy on margin, they must repay both the amount borrowed and interest, even if money is lost on the investment. Unfortunately, many investors do not understand the risks of trading on margin and sometimes they are unaware that they have a margin account.
Ponzi schemes: In Ponzi schemes, fraudsters focus on attracting new money to make promised payments to earlier-stage investors. This creates the false appearance that investors are profiting from a legitimate business. Ponzi schemes create problems for both the winners and the losers. A Ponzi scheme may go on for years, even decades — as in the case of Bernie Madoff's $50 billion scam. Later investors suffer immediately, often a complete loss of their capital, when the Ponzi scheme implodes or is shut down by the regulators.
Unauthorized trading: A stockbroker is not allowed to buy or sell securities on your behalf without your prior authorization — unless you specifically grant him or her the authority to trade at his or her own discretion. Many brokerage firms will not even allow their financial advisers to undertake such discretionary authority — for fear of the liability that may follow.
Negligence: Stockbrokers and investment professionals are expected to act according to a standard of care that is established by federal and state securities laws and by self-regulatory organization rules as promulgated by FINRA and the NYSE. When a broker deviates from that standard of care, the customer may have a claim for damages against their stockbroker and his or her firm.
Contact Us If You Were Harmed By Stockbroker Fraud Or Misconduct
Learn more about the counsel our attorneys can provide by scheduling a free initial consultation. We can be reached through our contact form or by calling 800-783-1413.