When you trust a financial advisor or brokerage firm with your investments, you expect them to handle your money responsibly. You also have a right to assume they will adhere to securities laws, federal regulations, FINRA regulations, and industry standards. However, some financial professionals fail to meet their obligations, which can lead to significant losses for investors. The United States has established robust securities laws to protect investors from misconduct, and these laws provide avenues for recovery through arbitration.
At Erez Law PLLC, we have helped investors recover more than $200 million in losses caused by broker and brokerage firm misconduct. With over 35 years of experience, having been hired on thousands of cases, successful in winning at trial or final hearing dozens of times in FINRA arbitration cases, and having successfully settled thousands of cases, we understand how to help investors pursue claims against financial professionals who violate securities laws. Contact us today for a free and confidential consultation about your investment losses.
What Is Securities Fraud?
Securities fraud occurs when brokers or brokerage firms engage in misconduct that causes investor losses. Securities and investment fraud activities may include:
- Unsuitable Investment Recommendations – When brokers recommend investments that do not align with an investor’s goals or financial situation
- Excessive Trading – When brokers make unnecessary trades in an investor’s account to generate commissions
- Misrepresentation – When brokers misrepresent key facts about investment products, often for financial gain
- Omission – When brokers fail to provide investors with material facts that would have changed their investment decisions
- Unauthorized Trading – When brokers buy or sell securities without obtaining proper authorization from the investor
- Over-Concentration – When brokers fail to properly diversify an investor’s portfolio, creating unnecessary risk
Brokers must follow applicable state and federal laws, FINRA rules, regulations, and industry standards when handling investor accounts. When they fail to do so, investors can pursue claims through Financial Industry Regulatory Authority (FINRA) arbitration to recover their losses. The law provides specific time limits for filing these claims. As such, it is essential to speak with an experienced securities attorney as soon as you discover potential misconduct.
What Are the Most Important Securities Fraud Laws in the United States
The United States has established several key laws that protect investors from securities fraud. These laws, regulations, and rules create the framework for pursuing claims when brokers or brokerage firms engage in misconduct. Some of the most important investment fraud laws and regulations in the United States include the following:
Securities Act of 1933
Often called the “truth in securities” law, the Securities Act of 1933 requires companies to provide accurate financial information when offering securities to investors. The law established registration requirements and mandatory disclosures. Investors can pursue claims through arbitration when brokers or firms fail to provide required financial disclosures or make misleading statements.
Securities Exchange Act of 1934
This law created the Securities and Exchange Commission (SEC) and established the regulatory framework for securities trading in the United States. It also created important investor protections by:
- Requiring ongoing financial reporting from public companies
- Establishing rules for proxy voting and tender offers
- Creating registration requirements for brokers and brokerage firms
- Setting standards for professional conduct in the securities industry
The Act also authorized the creation of self-regulatory organizations like FINRA, which provides an arbitration forum for investors to pursue claims against brokers and brokerage firms.
FINRA Rule 2111 Suitability
FINRA Rule 2111 Suitability requires broker-dealers to individually assess each investment recommendation based on the customer, reasonable-basis, and quantitative suitability. This rule requires FINRA-regulated members to:
- Reasonably believe an investment recommendation makes sense for the investor based on due diligence
- Use the information available within an investment profile to make reasonable recommendations for the specific individual, given factors such as the investor’s age, investment profile, risk tolerance, tax circumstances, and investment experience
- Only engage in a series of transactions that would not subject the investor to excessive and unsuitable risks
Regulation BI
Regulation Best Interest (BI) is an SEC rule that requires broker-dealers to only make investment recommendations that are in the customers’ best interests. The rule holds broker-dealers to a higher standard, requiring them to:
- Not put their own financial interest ahead of their customer’s
- Have a reasonable basis to believe their recommendation is in their customer’s best interests
- Exercise diligence, care, and skill when recommending investment products
- Implement policies to prevent potential conflicts of interest
- Clearly identify and disclose any potential conflicts of interest and financial incentives for making a particular investment recommendation
- Disclose information about their recommendations and their reasons behind them
- Provide customers with a client relationship summary that outlines the brokerage firm’s services, all fees, costs, conflicts of interest, obligatory standards of conduct related to the services, and a review of its disciplinary or legal history
- Not call themselves “advisors” if they are not held to a fiduciary standard
States Securities Laws
In addition to the federal rules discussed above, many states, including Florida, have their own state securities act. However, some – like New York – do not. These state laws seek to safeguard investors, maintain the integrity of the securities market within the state, and prohibit certain conduct, including securities fraud.
Securities Fraud Statute of Limitations
Investors who have suffered losses due to false or fraudulent pretenses must act within specific time frames to pursue their claims. For most cases, FINRA Rule 12206 establishes a six-year eligibility period for cases filed in FINRA Dispute Resolution – Arbitration.
State laws can also affect time limits for filing claims. While FINRA arbitration follows the six-year eligibility rule, some state laws provide different deadlines for securities-related claims. Additionally, certain types of investments might fall under various regulatory frameworks with their own time restrictions.
Given these complexities, investors should not delay seeking legal advice after discovering potential misconduct. Waiting too long to take action could prevent them from recovering their losses, even if they have a strong case.
Why Choose Erez Law PLLC for Your Securities Fraud Case
With extensive experience handling cases involving the NASDAQ Stock Market, the New York Stock Exchange, and other major trading venues, Erez Law PLLC has established itself as a leader in securities arbitration. Our firm has helped investors recover more than $200 million in losses, and we understand how to effectively pursue claims related to penalties for investment fraud.
Our experience includes:
- Over 35 years of experience representing investors
- More than 2,000 successful arbitration cases
- Dozens of awards in FINRA arbitration final hearings or trials
- Over $200 million recovered for investors
- Multiple awards for punitive damages
- National recognition for our arbitration skills
- Deep understanding of FINRA arbitration procedures
- Track record of substantial recoveries for clients
We focus exclusively on representing investors who have suffered significant losses due to broker and brokerage firm misconduct. Our team knows how to gather evidence, select arbitrators, and build compelling cases for our clients. Contact Erez Law PLLC today for a confidential consultation about your investment losses. Let us help you understand your recovery options.