Investment fraud most often happens when a savvy investment manager takes advantage of his or her clients by finding loopholes through which to make bad investments or trades that do not benefit the client, but bring in money for the banker or the firm. Because the average investor is not up to speed on the financial markets from day to day and often does not have the expertise to understand the inner workings of trades and stocks, a fraudulent account manager can really do some damage if he or she has full financial control to act on the client’s behalf.
Even without financial know-how, investors need to be aware of certain losses that could be red flags for fraud. Fortunately, a California stockbroker fraud attorney can help you understand the laws and rules that control the investment business and provide checks and balances for brokers. If you feel that your broker is not adequately answering your questions or if he or she is making large amounts of trades and purchases on your behalf with little returns, it is probably time to call a lawyer and discuss the possibility of investment fraud.
Recognize Investment Losses
The SEC and FINRA have regulations regarding the purchase of securities that are identical to those you would take a loss on for tax reasons, and when an investor fails to follow those rules, you could see the negative effect in your annual taxes. Investors should be up-to-date on the latest rules regarding any investment purchases and act accordingly with your funds.
Additionally, any investment made on your behalf should be one that fits in with your overall financial goals and does not exceed the amount of risk you are willing to take. Your broker has a responsibility to act for you and in your best interests, so whenever he or she fails in that duty—whether intentionally or by accident—you suffer and you have legal grounds to take action.
Misrepresentation and omission are two of the biggest ways a broker can convince you to invest in a fraudulent product or trick you into placing faith in an unsecure or unprofitable stock. In such cases, the investment manager will rely on your dependence on him or her for help in the world of investing and will use your lack of knowledge against you.
The SEC mandates that all stockbrokers, financial advisors and securities firms provide their clients with accurate information and up-front, appropriate guidance in making stock and securities investment decisions. This means that when a broker is presenting you with a new stock option to invest in, he or she has to give you all the necessary information about the investment and its potential for return or loss.
Any misrepresentation or omission on the broker’s part can be considered misconduct, especially if the broker does not disclose the risks involved, the losses that could be incurred as a result and the financial repercussions of a failed investment. Misconduct or breach of duty on the part of an investment agent or firm gives the affected client the right to bring legal action against the guilty party to recover financial losses.
At the Evans Law Firm, Inc., we help investors recover their financial losses from a fraudulent broker or firm. To discuss your case, contact one of our stockbroker fraud lawyers today.