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Possible Causes of Action for Investors
Unsuitability
An unsuitability violation occurs when a broker recommends an investment unsuitable to the customer's age, financial situation, investment objective, and investment experience. If a broker fails to adequately assess an investor's individual circumstances and goals thereby making unsuitable investment recommendations, the broker may be liable. Some examples of unsuitable investments for conservative investors include start-ups, buying on margin, over-concentration in technology or telecommunication stocks, and investing in junk bonds.
Churning (Excessive Trading)
Churning occurs when a broker engages in transactions that are excessive in volume and frequency, without the customer's permission, in order to generate commissions paid on each trade.
Unauthorized trading
Unauthorized trading occurs when the broker purchases or sells securities in a customer's account without first obtaining the customer's consent.
Misrepresentation and Omissions
A broker may be liable for misrepresentations and omissions by purposely providing false or misleading information to customers or by concealing material information. A violation may occur if a broker misrepresents or fails to disclose: the risks of investing in a particular security; the charges or fees involved; company financial information; and technical or analytical information, such as bond ratings.
Failure to Execute an Order
A broker may be liable for failing to use reasonable diligence to see that a customer's order is executed at the best possible price, given prevailing market conditions.
Overconcentration
Overconcentration occurs when a broker concentrates a customer's portfolio into a single investment or type of investment, thereby creating an unacceptable degree of risk within the portfolio.
Insider Trading
Insider trading occurs when a person with inside knowledge concerning the company's dealings uses information which is not public to trade stocks, usually for their own financial gain.
Negligence
A broker may be liable for negligence by failing to act in accordance with the minimum acceptable standards established in the securities industry. In other words, a customer has a claim for negligence if the broker failed to use reasonable care in handling the affairs of the customer, and did not act as a reasonable and prudent broker or advisor would have acted. A broker who issues unfounded, incorrect, deceptive, or otherwise misleading advice to clients, may be liable for negligence.
Securities and Exchange Commission (SEC) Violations
An SEC violation occurs when a broker is uses any manipulative, deceptive, or other fraudulent device or contrivance to effect any transaction in, or induce the purchase or sale of, any security. Brokers may be civilly liable for violations.
Other Possible Securities Claims
- Charging a customer excessive markups, markdowns, or commissions on the purchase or sale of securities.
- Guaranteeing customers that they will not lose money on a particular securities transaction, making specific price predictions, or agreeing to share in any losses in the customer's account.
- Trading for a firm's account in preference to a customer by trading ahead of a customer limit order, absent a valid exception.
Please contact our office with any questions concerning losses in your account.
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