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Apr 22, 2015 by |

Proposed Rule Change Could Help Prevent Stockbroker Fraud, Say California Stockbroker Fraud Attorneys


California stockbroker fraud attorneys say that the United States government is considering a new rule change that would help prevent stockbroker fraud.

The United States government is reportedly considering a rule that would require stockbrokers to put their clients’ interests above their own. This would prevent a stockbroker from prioritizing their own commissions above a client’s needs in making investment decisions, for example. Although now stockbrokers are obligated to consider their clients’ financial situations and risks in recommending investments, California stockbroker fraud attorneys say that this new potential rule would go a lot further in limiting stockbroker fraud.

A report from the Council of Economic Advisors alleges that conflicts of interest could be costing clients up to $17 billion annually. This change would hold stockbrokers to a higher ethical standard, say California stockbroker fraud attorneys, and would give clients a better chance of winning in arbitration against their broker. Currently, stockbroker clients who have been victims of stockbroker fraud can file with the Financial Industry Regulator Authority (FINRA) and go to stockbroker arbitration.

Some types of claims that could lead to a financial award for an investor include:
-Churning of account- This is excessive trading in order to increase broker commissions. The trades are unnecessary and often harmful, according to California stockbroker fraud attorneys.
-Suitability violations- This relates to recommendations from a stockbroker that have resulted in losses to a client’s account, from investments that are not appropriate for the client’s risk tolerance, financial situation, or investment objectives. California stockbroker fraud attorneys say that suitability violations could be reduced with the above proposed rule change.
-Negligence- A negligence claim can be filed if a stockbroker or its firm does not exercise reasonable care in carrying out customer instructions and managing accounts.
-Options “Exercise and Hold”/Failure to Diversify- Investors can experience substantial losses as a result of a stockbroker’s recommendation to many stockbrokers to exercise employer stock options by borrowing money from the brokerage, and to then hold the stock for at least one year to qualify for long-term capital gains treatment.

Evans Law Firm, Inc. handles stockbroker fraud, security fraud, and insurance fraud cases. If you believe you have a stockbroker fraud claim, please contact Evans Law Firm, Inc. at 415-441-8669 or via email at

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