Stockbroker & Investment Fraud Attorneys
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Individuals who have lost significant sums of money because of the negligence and errors of stockbrokers or investment advisers have an advocate in a Stockbroker Fraud Attorney. Whether you lost your life’s savings due to a broker’s churning or lost the opportunity to get an expected return on investment because of an adviser’s misrepresentation, you can turn to attorney Edward W. Vioni with confidence. Initial consultations come with no further obligation. Call or email to learn how Mr. Vioni can help you recover a stronger financial standing.
Clients of this law firm include individuals from all walks of life. Some have high assets, while others do not. Did your investment turn sour because of high commissions and poor performance of stocks that your adviser steered you toward? Whether your case is worth $50,000 or $5 million, you are well advised to talk your situation over with an experienced securities fraud lawyer.
Consult with an attorney on any of the following:
- Stock broker fraud or misrepresentation: Learn how to go about recovering your losses after you have been a victim of stockbroker fraud.
- Failure to diversify: Did a stockbroker lead you down the wrong path of putting most or all of your investments in one or two holdings, which then failed?
- Failure to supervise: Did a brokerage house fail to supervise a stock broker or trader? Did it result in financial loss for you?
- Breach of fiduciary duty: A broker’s or adviser’s bottom-line responsibility is to honor your trust in his or her professional integrity.
- Churning: It is illegal and unethical for a stock broker to excessively buy and sell investments in order to gain commissions.
Stock Broker Mismanagement – Failure to diversify
Smart diversification is a key strategy for most successful investors. If your stockbroker or financial manager steered you in the direction of putting most or all of your resources into one particular investment — and that investment failed — you may have cause for a lawsuit. Every stockbroker knows the importance of varying the types of stocks that an investor should purchase.
A stockbroker should act like the professional that he or she is. If your broker did not diversify your investments or concentrated them too heavily in one particular area, he or she owes you an explanation — and perhaps compensation. Even if the broker claims that he or she did not know about the lack of diversification, that broker may be responsible for negligence. Breach of fiduciary duty equals irresponsibility and negligence.
Whether a broker intentionally failed to diversify or negligently failed to monitor your investments, legal action may be appropriate. Stockbroker fraud and mismanagement in the form of failure to diversify are not acceptable for a broker. Perhaps your broker failed to disclose the fact that you were putting all your eggs in one basket until it was too late. Fraud and misrepresentation are causes of action for lawsuits. You are right to seek legal counsel in this situation.
Breach Of Fiduciary Duty
Entrusting your investments to a broker’s discretion is tantamount to handing that professional a large portion of your future on a silver platter. When you decided to do business with a “financial adviser,” as many brokers call themselves, you no doubt did so with confidence. You may have just believed that the broker would work hard to protect and enhance your financial strength.
However, now you may suspect that a breach of fiduciary duty by the broker has ruined or greatly diminished your investment portfolio. Under the law, a stockbroker is considered a fiduciary with respect to all matters within the scope of the investor-broker relationship. The most common situation of breach of trust happens when a broker sells an unsuitable investment. This may constitute a fraudulent act as well as a breach of fiduciary duty by the broker.
What legal recourse do you have to recover your losses brought about through mismanaged investments? Get the answers you need from a stockbroker fraud lawyer with the depth of knowledge that it takes to analyze data and arrive at conclusions that can build a strong case. Breach of fiduciary duty is a cause of action for civil cases that may be resolved through litigation or arbitration.
Failure to Supervise
If you suspect that your broker or brokerage house failed to supervise your account, it is important to act quickly and contact an attorney right away. Over time, memories can fade and evidence can go missing. The more quickly you act to protect your finances, the greater chance you have of recovering your losses.
What Is Failure to Supervise?
Brokerage houses have a duty to supervise the brokers, traders, and other types of financial advisors that they employ. Failure to supervise is a violation of FINRA rules, but this violation does not give rise to a separate claim. Instead, failure to supervise often highlights other issues such as fraud by an unsupervised broker. It may also point to an “omission” by a supervisor or brokerage house in failing to disclose to an injured investor that the broker was unsupervised.
Holding a Brokerage House Accountable
To hold a brokerage house accountable for a broker’s action, our firm will need to show that the brokerage house knew or should have known about the broker’s actions. Also, we must be able to show that the brokerage house had the actual ability to control or influence the controlled agent and did not use that ability.
In cases where a failure to supervise has been successfully proven, brokerage house liability for failure to supervise often comes from principles of what’s called an “employer’s vicarious liability.” This liability is found in “Agency” rules, where someone acts as an agent (the broker) with apparent authority (from the brokerage house). Investors who reasonably rely on this authority are often entitled to hold the brokerage house liable.
In addition to vicarious liability, 20(a) of the Exchange Act of 1934, 15 U.S.C. 78t(a) also says there’s a definite duty to supervise, or disclose otherwise to the investor:
“Every person who directly or indirectly controls a person liable under any provision of this chapter or any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable unless the controlling person acted in good faith and did not directly or indirectly induce the acts or acts constituting the violation or cause of action.” 15 U.S.C. 78t(a).
This is not always a difficult threshold of proof for a wronged investor. What is often difficult is acting quickly enough to protect the investor.
Churning and Excessive Trading Cases
Churning is excessive buying or selling in a customer’s account by a broker. This is often done to increase a broker’s commissions. It is a violation of SEC and FINRA rules and it can lead to significant losses for an investor.
Financial advisors who engaged in excessive trading while neglecting the best interests of a customer may be dismissed by their firm, excluded from the industry, and fined for the act. They may also be identified in Financial Industry Regulatory Authority (FINRA) arbitration lawsuits made by clients seeking restitution for financial losses.
Sadly, stockbrokers who are churning an account will frequently come up with extremely logical and professional-sounding explanations why this “trading technique” is in the best interests of the consumer. This might make it difficult for an investor to recognize that they have been a victim of churning until they have lost a significant amount of money or their account has collapsed.
Uncovering and Proving Excessive Trading
Churning is not a simple concept and neither is proving excessive trading. Every situation is different, and as a result, there is no straightforward test to determine if churning has occurred.
When you work with our firm, we look closely at the type of account that’s involved. With some accounts, high levels of trading may be natural and expected, while the same level of trading in a different type of account may be unjustified churning. An example of an account that would not justify excessive trading is a retiree’s account.
To help decide whether the trading in your account is excessive, we will consider your goals as well as calculate the “turnover ratio” for your account. Turnover ratios are the total amounts of purchases made in the account, which are then divided by the average monthly equity in the account. Turnover is then annualized.
An annual turnover ratio of six (which means that the equity in the account was invested six times in a year) can be a sign of excessive trading in a typical customer account. However, with a day trader account or some margined accounts, a typical ratio of six wouldn’t indicate churning. We can help explain the differences between the account and whether the ratio is high or low for your type of account.
Other Elements of a Churning Case
In addition to demonstrating excessive trading with your account, churning requires that the broker had control over your account. Also, we must show that the broker intended to defraud you. These elements can be difficult to prove and often brokers and customers in arbitration totally ignore these elements of a churning case.
Cryptocurrency Fraud
As a newer technology with few government controls, cryptocurrency has attracted fraud. Cryptocurrency fraud refers to any fraudulent activity involving the usage of cryptocurrency or the creation or trading of cryptocurrency. Wire or mail fraud, Ponzi schemes, investment fraud, and tax fraud are examples of criminal acts that may be related to “cryptocurrency fraud.” These plans might take several shapes.
Initial coin offers (ICOs) are a way for a new cryptocurrency, app, or other crypto business to raise funding. Issuers may be held accountable for fraud if they make a material misrepresentation or omission in connection with an ICO.
Scams involving cryptocurrency marketing can take many forms, including fake celebrity endorsements, phishing scams in which people are blackmailed into transmitting cryptocurrency payments, “pump and dump” scams in which a significant number of traders are influenced to buy a coin in a short amount of time in order to artificially increase the price, and then the offender sells a large holding to cash during which the value plummets, and more.
