Different types of securities fraud can cost investors significant sums, as they may lose most or all of their investments. Here are some of the most common securities fraud schemes:
Unauthorized Trading
Brokers may defraud clients by engaging in unauthorized trading, where they buy and sell securities without the client’s authorization. Brokers may engage in unauthorized trading for various reasons, such as manipulating stock prices as part of a pump-and-dump scheme or profiting from transaction fees.
Selling Away
Brokers are required to only recommend investments that their employer has approved. This helps ensure that investment products are properly vetted. Recommending other investments is called “selling away” and is a violation of securities laws.
Churning/Excessive Trading
Trading regularly is part of many investment strategies, but some brokers make excessive trades on their customers’ accounts simply to generate commissions. When brokers put their financial interests above their customers’, they are violating securities principles. Their employers may be responsible for resulting losses and can be held accountable through FINRA arbitration.
Options Fraud
Options fraud can occur when brokers misrepresent or omit material information when making investment recommendations, make unauthorized trades in options, overconcentrate investors’ portfolios in options, or make investment recommendations in options that are unsuitable for their particular customers.
Structured Notes Fraud
Our law firm is actively taking cases involving structured notes fraud, including those from broker Chuck Roberts. Because investors risk losing their underlying principal in these investments, broker-dealers are subject to heightened restrictions when making these recommendations.
Margin/Credit Line/Leverage Fraud
If your broker dealer recommended borrowing money from a brokerage firm to buy securities to use as collateral to repay the loan, they may have committed fraud if they:
- Failed to provide an adequate explanation of the potential risks of trading on margin
- Misrepresented information about margins
- Failed to disclose information about the costs and fees that margin trading caused
- Charged excessive fees or interest
- Overconcentrated your investment portfolio
- Did not consider what was in your best interest when making investment recommendations
We can investigate to determine if your broker violated relevant Financial Industry Regulatory Authority (FINRA) rules and if you have options to recover your investment losses.
Unsuitability
Brokers must conduct due diligence to determine the potential risks and benefits of investments before they make recommendations. They must also carefully consider whether a proposed investment strategy matches the client’s investment objectives and aligns with their risk tolerance to determine its suitability for a particular investor. When they fail to conduct this stringent analysis, employers may be liable for their negligence.
Misrepresentation/Fraud
Misrepresentation occurs when a broker lies about or omits material information that would be necessary for investors to make informed decisions about their investment strategy.
Contact an Experienced Securities Fraud Lawyer for a Free Consultation
If you’ve become a victim of one of the types of securities frauds, you need experienced legal counsel to help you seek compensation and justice. Contact Erez Law, PLLC today for a free and confidential consultation with a securities fraud attorney to discuss your options for pursuing accountability for your financial losses in a securities fraud lawsuit.
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