Sometimes a stockbroker may say that he has information from certain sources inside the company which is not available to the general public. The broker may indicate that he is certain that the stock will be going up based upon such information and urge the customer to buy the stock.
Trading Without Permission
Sometimes a client may be surprised to discover certain trades made in their account which had not been approved by the client. This is unauthorized trading, which is strictly prohibited and is considered securities fraud.
Promised Gains
Another common complaint is that the stockbroker promised that the stock would go up and that the investment was a "guaranteed sure winner." When a stockbroker aggressive sales tactics and goes too far, such statements may constitute unlawful misrepresentations.
Excessive Trading (Churning)
If a stockbroker is constantly buying and selling in the account, this may be evidence of churning, which is excessive trading in order to generate broker commissions. Such activity constitutes a form of securities fraud even if the broker is constantly calling the customer prior to placing the trades.
Broker Malpractice
Occasionally it may seem that a particular broker just does not know what he or she is doing. This may be in terms of executing trades, following instructions, or general performance of the portfolio. Brokers are held to certain standards of the securities industry and must be licensed. Failure to maintain a certain level of competence in the management of an investment account may constitute negligence or malpractice.
Misrepresentations
Sometimes clients complain that their broker said that something was a very safe investment but in fact it high risk. Clients rely upon the recommendations of stockbrokers, and failure to properly disclose the risk is a misrepresentation or material omission.
Margin Problems
Many complaints arise from problems which occur when a portfolio is on margin. A client may complain that the broker put the account on margin without their authorization. More frequently however, the problem is not that the account was put on margin without any authorization, but rather that the broker put the account on margin without explaining the risks and problems associated with margin trading. Since a margin account involves trading with borrowed funds, there are special risks associated with margin that must be explained to a customer at the outset.
Complaints to Supervisor
After repeated complaints to the broker about certain improper activity, clients sometimes finally complain to the broker s supervisor. Occasionally this will resolve the problem, but sometimes those complaints will also be ignored. But even more maddening is the "comfort letter" which customers may receive from a brokerage firm even after making a complaint.
For more information on securities fraud please contact an experienced stock fraud attorney.
Bookmark it:
No comments:
Post a Comment