Broker Misconduct

Stock Broker Misconduct and Fraud Attorneys

The broker-investor relationship is built on trust. We trust the broker to understand our financial objectives and to manage our assets in accordance with our best interests. When that trust is shattered by broker misconduct, the results can mean investment loss as well as loss of trust in a valued advisor.

At Levi & Korsinsky, our lawyers understand this trust – and we understand the profound disappointment clients feel when that trust is breached. The breach of trust often involves one or more of the following complaints:

Churning: When a broker excessively trades within an investor’s account, it is referred to as “churning.” What is “excessive”? That depends on whether the activity is justified by the investor’s objectives and financial situation. Why would a broker churn an account? The motivation could be a desire for commissions on the trades. Large commissions, a high turnover rate, and an account cost analysis can all indicate churning.

Unsuitable Recommendations: When a broker recommends a purchase, sale or exchange of a security, that recommendation should be based on a thorough understanding of the investor’s financial status, investment objectives, risk tolerance, and level of sophistication. There is a “Know Your Customer” rule all brokers are expected to follow.

Breach of Fiduciary Duty: The trust and reliance an investor places in a broker gives rise to what is called a “fiduciary relationship.”  A fiduciary (the trusted broker) is obligated to act diligently and faithfully in promoting the investor’s best interests. The broker cannot abuse that trust.

Fraudulent Use of Statements or Omissions: Before an investor buys, sells or exchanges a security at the broker’s recommendation, the investor should be given all relevant facts surrounding that security. Concealing relevant facts or failing to disclose potential risks can be seen as fraudulent.

Unauthorized Transactions: Before making a trade, the broker must contact the investor for approval before the trade – not afterward. Trades can be made without calling the investor, but only if the broker has the investor’s written discretion. Oral approval is suitable for time and price decisions only in a fully discussed situation and not for the entire account’s activity.

Mutual Fund Switching: Mutual funds are generally considered to be long-term investments. Sometimes switching a fund within the same family of funds can be a sound move for the investor. Unfortunately, this is not always case, and many people suffer severe losses from excessive or improper mutual fund switching.

Other Misconduct: Brokers sometimes abuse investor trust by improperly marking tickets, using inside information, front running, sharing in accounts, using margins inappropriately or without authorization, and by failing to supervise and manage the account.

If you have suffered from these or any other acts of broker misconduct, Levi & Korsinsky has experienced broker fraud and misconduct attorneys who can evaluate your case, and advise you as to how best to proceed. Contact us for a free consultation. We work on a contingency fee basis, so there is no fee unless we recover for you.