Yes, you can file a claim against your stockbroker or financial advisor.
Registered financial advisors operate under a number of securities laws and financial industry rules and regulations. If your broker or investment advisor has breached their professional duties to you, they can and should be held legally liable for any resulting financial losses.
In practice, holding a stockbroker or financial advisor liable for fraud or negligence can be a challenging endeavor. In some cases, you can seek compensation through litigation (a lawsuit); in other cases, you may be required to seek recovery through a FINRA arbitration with the help of a qualified FINRA attorney.
If you are considering legal action against an investment advisor, it is imperative that you seek professional legal guidance. Do not file your claim alone. At Sonn Law Group, our dedicated securities fraud lawyers will review your claim for free, explain your legal options to you, and determine exactly what steps must be taken to get you the full compensation you deserve.
Your Investment Agreement May Contain an Arbitration Clause
In many cases, investors are not technically eligible to file a lawsuit against their stockbroker or financial advisor. This is because the overwhelming majority of modern investment agreements contain mandatory arbitration provisions.
If there is a pre-dispute arbitration clause within the agreement that you signed with your broker or brokerage firm, it will almost certainly be enforced. This means that you will be required to seek compensation through the FINRA arbitration process. The good news is that FINRA arbitration is much like a mini-trial.
If your arbitration claim is successful, you may be issued a FINRA arbitration award that includes financial compensation for the full value of your losses.
While the FINRA arbitration process is somewhat similar to traditional litigation, there are also some very important differences. If you are filing a FINRA arbitration claim against a bad broker, you should be sure to work with a qualified investment fraud attorney who has deep experience with the intricacies of FINRA’s rules, regulations, and filing guidelines.
Losing Money is Not Enough to Successfully Sue Your Broker; You Must Prove Fraud or Negligence
If you have lost a large amount of money in an investment, you know how awful it feels. It is stressful, frustrating, and worse yet, it can be financially ruinous. It is also right that the responsible party is held accountable. However, under U.S. federal securities law and FINRA regulations, investors cannot hold brokers legally liable simply because they lost money.
In order to prevail in an investment fraud lawsuit or FINRA arbitration cases, an investor must be able to assert a viable ‘cause of action’.
In the simplest of terms, an investor must be able to prove that their financial representative committed fraud or acted in a negligent manner and that there is a connection between the fraud or negligence and the investor’s financial losses.
There certainly some cases in which financial advisor fraud or stockbroker negligence is clear and obvious. However, most investment fraud claims are highly complex. To prove fraud or negligence, investors should work with an experienced attorney who can help them carefully assemble all of the documents, records, and evidence together into a compelling, persuasive legal case.
Most Common Reasons to Sue Your Stockbroker or Financial Advisor
Stockbrokers and financial advisors fail to live up to their professional duties for many different reasons. In some cases, investor lawsuits and arbitration claims involve allegations of outright theft or forgery of documents. In other cases, negligent brokers steer an investor’s money into risky, inappropriate financial products in order to obtain higher commissions.
Our law firm handles all types of investment fraud and broker negligence claims. Some of the most common examples of cases that we see include:
- Breach of Fiduciary Duty: Under the Investment Advisers Act of 1940, certain investment professionals, known as registered investment advisors (RIAs), owe fiduciary obligations to their customers. Your RIA must always look out for your best interests. If you lost money because of your RIA’s breach of fiduciary duty, you may be entitled to compensation for the full value of your damages.
- Unsuitable Investments: Many financial advisors are not fiduciaries. Instead, they are held to the suitability standard. These stockbrokers and financial advisors can only sell and recommend financial products that are appropriate for a customer’s unique investment profile. If you lost money in unsuitable investments, you should consult with an attorney immediately.
- Material Misrepresentations or Omissions: Brokers have a duty to make fair and honest representations to their clients. If they fail to do so, and an investor loses money due to a misrepresentation or a material omission, the broker may be liable for the investor’s losses.
- Lack of Diversification: Brokers must also act with the appropriate level of professional skill. Pushing a customer into over-concentrated investments is highly risky. Brokers can be held liable for losses sustained because of an investor’s inappropriate lack of diversification.
- Excessive Trading (Churning): Stockbrokers and financial advisors must have a well-grounded, reasonable basis to execute all trades. Unfortunately, there are cases in which brokers will frequently trade on a customer’s account, simply to increase their own fees. This unlawful practice is known as churning.
- Unauthorized Trading: Brokers must have the proper legal authority to make transactions on behalf of a client. If you lost money because your broker made trades that you never approved of, you may have been the victim of unauthorized trading. You should consult with an experienced attorney.
Contact Our Attorneys to Discuss Whether You Can Sue Your Financial Advisor
At Sonn Law Group, our law firm is committed to helping investors recover full and fair financial relief for their losses. If you were a victim of stockbroker fraud or financial advisor misconduct, we are here to help.
To arrange a free, no strings attached case evaluation, please do not hesitate to contact our law office today. We handle all broker fraud and broker negligence claims on a contingency fee basis — our attorneys only get paid if we help you obtain financial compensation.