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Investment Fraud

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 California securities fraud lawyer and discuss the possibility of investment fraud.

Evans Law Firm, Inc. handles FINRA (Financial Agency Regulatory Authority, formerly NASD (National Association of Securities Dealers)) securities arbitrations on behalf of senior citizens that have been the victims of abusive and fraudulent sales of securities, including the sale of variable annuities.  Fraudulent investor practices and claims usually involve the following practices:

  • Unsuitable recommendations or inappropriate or fraudulent investment advice;
  • Churning or over-trading;
  • Misrepresentation and/or omissions;
  • Failure to diversify and over-concentration;
  • Financial abuse of elders through the sale of unsuitable variable and other deferred annuities;
  • Failure to give appropriate advice with respect to employee stock options;
  • Pension fund fraud; and/or
  • Mismanagement (negligence or failure to act in accordance with the standard of care), negligent supervision by brokerage firms, and brokerage malpractice.

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.

Avoiding Stockbroker Fraud

As an investor there are certain signs you can look for to help you identify a suspicious situation. Below is a list of some popular tell-tale signs that illegal practices may be occurring.

  • Receiving letters or emails with spelling errors and without official letterhead
  • A promise of an instant return on your investment
  • Sharing personal or insider information
  • Pressure to submit paperwork quickly
  • Encouragement to take money from other accounts in order to afford this investment.

It is also good practice to ask for written information, like an annual report. At Evans Law Firm, Inc. we have never heard of a successful get rich quick promise. In general, a good motto is “if it is too good to be true, it probably is.”

Yet, even the most aware investors fall prey to stockbroker fraud. If you believe your financial advisor is illegally handling your investment call Evans Law Firm, Inc. We offer a free, no obligation consultation. A California stockbroker fraud lawyer at our firm will listen to your situation and help you evaluate what to do next.

What to Do If You Are a Victim

Most of our clients are not expert investors. They don’t have a financial background. That is why they trusted their financial advisor to handle their money in a skilled and professional way.  If your stockbroker committed fraud by managing your money in an illegal way you must take action against the individual or the firm.

They are violating their fiduciary duty and need to be stopped so they cannot continue their illegal practices. Call a California stockbroker fraud lawyer at Evans Law Firm, Inc. Together we can determine if you need to file an individual arbitration claim with FINRA.

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