Investment Fraud

Information on Investment Fraud and FINRA Claims

Investment fraud refers to investment losses related to mismanagement and fraudulent or illegal practices by a stock brokers or financial adviser in handling their clients' assets. Each and every transaction, trade and agreement between an investor and a broker is subject to strict regulations under FINRA, the Financial Industry Regulatory Authority. If you have sustained financial losses that you believe may be linked to fraud or negligence, you may be entitled to file an investment fraud claim. This page provides comprehensive information on stock broker regulations and responsibilities, types of investment fraud, and indicators that your investment losses may be the result of investment fraud.

What is Investment Fraud?

Investment fraud is a broad term that describes illegal and unethical practices on the part of a stock broker or financial planner which result in losses to the investor. Occasional losses are an inevitable part of investing, yet some losses may not be justified. If a stock broker was acting outside their contractual and legal terms, the investor may be eligible to file an investment fraud claim to recover their losses.

Investment fraud can simply amount to bad investment advice, inattention, or negligence. Intentionally deceptive schemes, unauthorized trading, and excessive trading are other examples of investment fraud. Stock brokers and investment advisors are bound by law to exercise a degree of care in offering financial advice and handling investment portfolios. Brokers and financial institutions that take advantage of their clients can be held accountable for their actions through FINRA arbitration, mediation and litigation.

Types of Investment Fraud

Investment fraud, which is also known as securities fraud and stock fraud, can be extremely difficult for an investor to detect. Any time you suffer a large financial loss, especially loss that is more significant than the risk you'd understood, you should consider the possibility that investment fraud may have taken place. Your broker has a responsibility to exercise care in giving investment advice and making transactions. Investment fraud ranges from negligence and bad advice to active deceptive and illegal scams.

Investment fraud may include:

Unauthorized Trading
Overconcentration / Lack of Diversification
Portfolio Mismanagement
Failure to Supervise or Execute
Churning / Excessive Trading to generate commissions
Breach of Fiduciary Duty
Fraudulent Misrepresentation and Nondisclosure
Fraud Pertaining to Annuities or other Insurance Products
Unsuitability
Margin Trading
Ponzi and Pyramid Schemes
Signs of Investment Fraud

When faced with a loss, it is natural for an investor to feel embarrassed, assuming they have made a mistake. Investing entails risk, and loss is a natural part of taking financial risks. Yet not every investment loss is the fault of the investor. When a financial institution, stock broker, or financial adviser fails to exercise reasonable care in handling their clients' investments, or engages in an illegal scheme or practice, the investor has a right to pursue damages.

In many cases, the first sign that investment fraud caused a loss is an intuition rather than the discovery of a clear fact indicating negligence. Investors should look out for the following signs of investment fraud:

The losses you have sustained are in excess of the risk you had agreed upon.
You detect a trend of excessive trades or suspect unauthorized trading.
You stock broker stops returning calls or will not directly answer questions about the financial loss.

FINRA Investment Fraud Violations

When an investor suspects investment fraud, they may pursue damages through FINRA arbitration. Each and every investment transaction is subject to FINRA agreements, and therefore most stock fraud claims cannot be tried in regular courts. Investment fraud claims are brought before a FINRA arbitration panel consisting of 1-3 professionals which hears testimony, examines evidence, and announces a binding decision to resolve the case. FINRA has a specific mediation and appeals process that also applies to investment fraud claims.

Investment Fraud Attorneys

When an individual investor is harmed by the unethical or illegal actions of a stockbroker or securities firm, our attorneys are committed to pursuing justice on their behalf. Our attorneys provide investment fraud representation on a contingency basis, meaning we charge no legal fees unless we win compensation for you.