Broker Misconduct Attorney

broker misconduct

A financial advisor should be a source of appropriate recommendations, transparent information, and honest advice. They are an investor’s connections to Wall Street, recommending suitable investments and creating a diversified portfolio. The advisor-investor relationship relies on the ability to trust an advisor to provide suitable recommendations and treat their clients fairly.

Unfortunately, there will always be brokerage firms that abuse their position, pressuring brokers to sell bad investments to their clients through their advisers in order to increase their own profits at the expense of investors. While not all market losses stem from misconduct, some do. Learn to recognize this harmful practice to protect yourself and your family from fraud. If you believe you’ve been a victim of misconduct, Erez Law may be able to help you get some or all of your lost money back. Our investment fraud law firm represents clients throughout the U.S. including Puerto Rico, as well as throughout Latin America in countries like Venezuela, Argentina, Colombia, and Mexico. We represent individual investors, retirees, trusts, pension plans, partnerships, family partnerships, family offices, and ultra-high-net-worth individuals. We are invested in helping you recover losses from untrustworthy or inexperienced brokerage firms.

Why Should I Have Erez Law Represent Me?

If you have experienced a financial loss due to the misconduct of a stockbroker, you need to know your legal options moving forward. But most importantly, you need a firm you can trust. We will earn your trust as we fight vigorously for you against the party that broke it. That is the Erez Law guarantee.

Having been representing people for over 20 years, our attorneys have won all kinds of cases. We have recovered over 175 million dollars in mislead investments for our clients. We treat every case like it will go to trial and set ourselves apart with our proven track record of success. In fact, we’ll let some of our recent results speak for themselves:

  • Recovered over $11.1 million for trustees of the Zeenat N. Madhany Revocable Trust and Nasirdin H. Madhany Revocable Trust from Citigroup Global Markets, Inc. Citigroup broker Smith Barney sold the trustee’s investments not approved by his firm.
  • Recovered $6.2 million for an ultra-high-net-worth individual for an unsuitable investment recommendation by a major brokerage firm.
  • Recovered $4.5 million for the National Bank of Mexico from the misconduct on behalf of Morgan Stanley & Co. Inc.
  • Recovered $3 million in Puerto Rican bonds for clients who acquired unsuitable investments due to misrepresentation on the part of a major brokerage firm.

These are just a few of the cases that we have won for our clients. We represent everyone—from the high-profile businessperson to the families whose retirement was swindled by a lying broker. Our firm believes that when good people lose valuable money and assets based on lies and greed on the part of the broker, they deserve every cent back.

The Broker Duty of Fair Dealing

Broker misconduct, or securities fraud, can cost a family hundreds of thousands of dollars in an instant. “Broker misconduct” is an umbrella term that refers to a range of ways a broker can betray the trust of his or her investors. Brokers must act in the best interests of clients throughout the investment relationship. The basic duty that brokers owe is a “duty of fair dealing.”

The duty of fair dealing is, in essence, a broker’s promise to disclose all facts relating to an investment, follow client instructions, ensure investments are suitable, and charge fair market rates. Investors trust brokers to steer them in the right direction regarding investments, advising them candidly.

Brokers have many professional duties during the broker-client relationship, including:

  • Making suitable recommendations
  • Making fair and balanced risk disclosures
  • Managing a client’s investment portfolio
  • Disclosing conflicts of interest
  • Researching financial markets
  • Monitoring clients’ investments
  • Reporting information to clients

The Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), federal securities laws, and state securities laws have strict rules and laws when it comes to a financial advisor’s conduct. Although these rules regulate adviser conduct, many brokerage firms require advisors to recommend unsuitable investments to increase their own profits. Without truthful and complete disclosures, many bad brokers sell unsuitable investments and mislead their clients to their detriment.

Investors Face Major Investment Losses Due to UBS Financial Services Inc. for Yield Enhancement Strategy

Types of Broker Misconduct We Fight Against

A broker can commit fraud during any stage of the investing process. Negligent brokers may make a harmful mistake by failing to do their duties. Fraudulent brokers purposefully participate in deceptive schemes to boost their own commissions. Either way, victims may have a legal outlet that can help them regain their lost investments or retirement funds. Here are a few common types of broker misconduct we’ve encountered in our years as attorneys:

  • Unsuitable investments. It’s a broker’s job to research the market, understand clients’ situations, and recommend investments that are appropriate for a client. No broker should compromise your future with unsuitable investments.
  • Misleading or Incomplete Information. If a broker misleads a client regarding the risk of an investment or fails to disclose material information, this may be a violation of the broker’s obligation to his or her client.
  • Churning. When a broker excessively purchases and sells securities in a client’s account (with or without authorization), it’s a red flag for broker fraud. Churning, or excessive trading, can generate extra commissions and fees for the broker.

These are just three of the many ways financial advisors can commit fraud or act carelessly. Other potential issues include:

  • Excessive Trading: Very similar to churning. When a stockbroker earns a commission, it can create a conflict of interest where they want to make as many investment sales as possible.
  • Selling Away: Selling away is when a broker goes against the wishes of their firm to sell you a vast amount of unauthorized investments. This is an inappropriate practice that violates regulations.
  • Unauthorized Trading: When a broker starts making trades without their client’s permission mistakes will happen. A broker should never trade behind an investor’s back, and this kind of behavior often leads to defrauding.
  • Lack of Diversification: Brokers should know the importance of investing in a variety of assets. Diversifying makes sure that when one company loses stock, your entire portfolio doesn’t fall with it. Despite this, many brokers don’t participate in this tactic.
  • Excessive Use of Margin: When you are buying on margin, you are essentially borrowing money from the brokerage firm. Brokers can often take advantage of this and excessively abuse your portfolio and collect the commission.
  • Fraud or Misrepresentation: When a broker lies or misrepresents bad investments as stable sources of earnings, their clients lose. Brokers are hired by their clients to better their investments, not rake in profits off of them.
  • Violation of State and Federal Regulations: Brokers have to abide by laws and federal regulations set forth to protect investors. They have to provide honest information and uphold a professional relationship with their client. When they break these laws, they can be held accountable.
  • Broker Negligence: Brokers are hired by their clients to watch over and help grow their investments. When brokers slack on their duty, it often results in massive financial losses for their client where the whole firm could even be liable.
  • Failure to Supervise: Brokerage firms are required by law to adequately supervise their brokers to make sure they aren’t manipulating their client’s money for profit. When they fail to instate proper supervisory systems, negligence, and corruption can occur.
  • Over Concentration: A broker or investment firm works to diversify their clients’ portfolios to lower risk. If they do not adequately diversify, and you suffer losses as a result, this is considered fraud.

There are risks associated with investing, but your broker should not be their source. If a broker’s misconduct has caused you substantial financial harm, we can help you hold them accountable.

The Problem With BrokerCheck

To a potential investor, it could seem like hiring a stockbroker is taking a shot in the dark and there is just no way to ensure that who you are getting will have your interests at heart. This is a common problem with only a few suggested solutions, as it’s difficult to prescreen possible brokers completely. One such service, founded by the Financial Industry Regulatory Authority or FINRA, is It’s known as the best tool for finding a broker, but a recent study found that the website was far from perfect.

The study was conducted by doctors Hammad Qureshi and Jonathan Sokobin of FINRA, and supplemented through the Securities Litigation and Consulting Group; they were looking into the effectiveness of One of the key findings of the research was that, overall, the website did not provide a lot of helpful information about potential brokers. The website did have the significant capability to help investors distinguish between brokers who were associated with “investor harm events” to those that didn’t, but researchers also revealed that the website wasn’t letting on as much information as it had. The website doesn’t look at firms as a whole, despite having that information, but instead weighs each broker individually. This is important because another finding linked misconduct between coworkers. If one broker’s coworker had harmed their client, then it was likely that they were also harming their clients. Corruption spreads through the work culture through an atmosphere of tolerating misconduct.

A suggestion, following the study, was that the website adds to the algorithm: in determining a good broker, including how many complaints their firm has received. When moving forward, knowing the results of this study can help you choose a new broker. The attorneys of Erez Law are interested, however, in helping you now. If you didn’t find out your broker was corrupt until it was too late, you need an attorney who can fight for you.

How Do I Know if My Stock Broker is Engaging in Misconduct?

Unless you bring your case and financial statements to a consultation with a broker misconduct attorney, there is no concrete way to know if your broker is swindling your investments. However, there are a few signs that you can look for when checking your finances to see if something strange is going on. These signs include:

  • Sudden losses that are larger than average
  • Unknown trades in your account that you don’t understand
  • A recent trend of an excessive amount of trades, more than usual
  • Unexplainable losses or withdrawals in your account
  • Risky or unsuitable investments were pushed onto you by your broker
  • An investment was made to your account by your broker without discussing all of the details

These are evident red flags that mean that your broker is engaging in misconduct with your portfolio. If you see any of these signs appearing in your account or financial statements you need to call an attorney as soon as possible.

Contact Our Broker Misconduct Attorneys

Erez Law extends its professional legal services to anyone who believes a broker’s misconduct has caused major losses. If you’ve lost more than $50,000 in bond losses, fund losses, stock losses, or structured product losses, and you have a feeling there’s been foul play, contact Erez Law. Our trustworthy team of securities attorneys works to prosecute cases on behalf of wronged investors. Call (888) 840-1571 for a free consultation.

Read More: