Common Claims Against Stockbrokers
Despite how their services are advertised as “putting your interests first,” there is a striking difference between the positions brokerage firms take when soliciting customers and those they take when those customers arbitrate claims against the same firms. See, Advertising Like Doctors, Arbitrating Like Used Car Salesmen: “Huge Disconnect” Seen Between Brokerage Ad Claims and Tactics Used to Fight Aggrieved Investors.”
On June 5, 2019, the Securities and Exchange Commission adopted a package of rulemakings and interpretations designed to enhance the quality and transparency of retail investors’ relationships with investment advisers and broker-dealers, bringing the legal requirements and mandated disclosures in line with reasonable investor expectations, while preserving access (in terms of choice and cost) to a variety of investment services and products. Specifically, these actions include new Regulation Best Interest.
Regulation Best Interest or “Reg BI,” which became effective on June 30, 2020, established a standard of conduct for securities broker-dealers or “brokerage firms” and their associated persons or “stockbrokers,” and “financial advisors” when they “recommend” securities transactions to retail customers. Rule 15l-1(a)(1) of the Exchange Act, 17 CFR § 240.15l-1(a)(1).the new Form CRS Relationship Summary, and two separate interpretations under the Investment Advisers Act of 1940.
Individually and collectively, these actions are designed to enhance and clarify the standards of conduct applicable to broker-dealers and investment advisers, help retail investors better understand and compare the services offered and make an informed choice of the relationship best suited to their needs and circumstances, and foster greater consistency in the level of protections provided by each regime, particularly at the point in time that a recommendation is made.
However, as is the law in approximately 37 states, as a general matter, all or substantially all claims against stockbrokers and investment professionals, including churning, unauthorized trading, the sale of unsuitable investments, the sale of defective financial products and even the failure to supervise, can be characterized as a breach of a fiduciary duty, and specifically, the duty of due care, the duty of loyalty, or the duty of candor.
For example, in the case of churning or excessive activity, which is an express violation of FINRA Conduct Rules, the real claim can be fairly characterized as the broker effecting excessive transactions in a customer account, not with the intention of further the customers interest or investment objective, whatever that investment objective may be, but instead with the intent of furthering the broker’s own financial or pecuniary interest.
The same may be said regarding suitability, both “reasonable basis suitability,” in that the broker or the brokerage firm conducted sufficient due diligence and product knowledge to reasonably understand that features of any particular investment, and “customer specific suitability,” in that given the understanding of any particular investment, for what specific customer may this investment be suitable.
Under such circumstances, the failure to perform due diligence, or the wrongful or unsuitable recommendation of otherwise risky investments to specific customers for whom these investments may not be suitable, can really, in all practicality, be seen as recklessness or the breach of the duty of due care.
Based upon our more than thirty years experience representing injured investors in claims against broker-dealers, investment professionals, and financial institutions for a variety of forms of misconduct, which have of course changed very much over time, and now includes cyber-theft, romance scams, we have assembled information and our non-exhaustive list of common claims against broker-dealers, investment professionals, and financial institutions.
Common Claims Against Stockbrokers Include:
Failure to Conduct Due Diligence
False Statements and Omissions
Forgery and Alteration of Documents
Negligent Retirement Planning
Unsuitable Investment Recommendations
Guiliano Law Group
For more than thirty years, our practice is limited to the representation of investors in connection with claims against securities broker-dealers, investment professionals, and financial institutions for fraud, negligence, the sale of unsuitable investments, defective financial products, Ponzi schemes, cybertheft, breach of fiduciary duty, and the failure to supervise.*
OUR PRACTICE AREAS
FINRA Arbitration
The litigation of individual and group investor claims against securities broker-dealers and investment professionals adjuducated in arbitration before the Financial Industry Regulatory Authority.
Defective Financial Products
Alternative Investments, Promissory Notes, Structured Products, High Yield Bond Funds, Non-Marketable Real Estate Investment Trusts, Inverse and Leveraged ETFs, the Failure to Conduct Due Diligence.
Unsuitable Investments
Speculative or High Risk Investment Recommendations, Unsuitable Investment Strategies, Low Priced Securities, Customer Specific Unsuitability, Inappropriate Investment Recommendations.
Stockbroker Misconduct
Breach of Fiduciary Duty, Churing, Unauthorized Trading, Fraud, Stockbroker Theft, Ponzi Schemes, the Sale of Unapprovied investments.
