Securities Fraud

Information on Securities Fraud and FINRA Claims

Stockbrokers, investment advisors, and investment firms are government by strict rules of conduct regarding the management of their clients' portfolios. When a broker acts outside of these standards and the investor experiences a financial loss as a result of stockbroker misconduct and securities fraud, the investor may be entitled to damages. This page provides a thorough overview of securities fraud, including information on investor agreements, types of securities fraud, and warning signs that your financial losses are linked to securities fraud.

What is Securities Fraud?

The term Securities Fraud refers to financial losses suffered by an investor as a result of mishandling of their account. Also called "stock fraud" and "investment fraud", securities fraud occurs when a financial advisor uses deception to convince investors to buy or trade stocks based on false or inaccurate information. Securities fraud can be the result of bad investment advice, negligence, or an intentional scheme that results in investor loss.

A set of legal standards, set out by the Financial Industry Regulatory Authority (FINRA), govern the conduct of stock brokers and securities advisors. These professionals are required to take ordinary care in making decisions regarding each investor's account. Every agreement made between an investor and financial advisor is protected by FINRA regulations.

Types of Securities Fraud

Securities fraud ranges from bad investment advice to unethical and illegal conduct on the part of a broker or financial advisor. Some types of securities fraud is an intentional and complex scheme; other types result from negligence or mismanagement. Investors place the utmost trust in their financial advisor, placing their family's financial security in their stock broker's hands.

Securities fraud may include:

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

Signs of Securities Fraud

Investing implies a certain degree of risk, and losing money is an inevitable experience. For this reason, it can be difficult for an investor to detect when their losses are the result of fraud or negligence on the part of the financial institution or stock broker. Often, an investor's first inkling of securities fraud is a gut feeling rather than a telling fact. Here are some common signs you may be a victim of securities fraud:

You have experienced surprising financial losses which are more significant than the risk you had perceived.
You notice excessive or unauthorized trading has occurred on your account.
Your financial advisor will not answer questions about the losses you have suffered, or will not return your calls.

Securities Fraud and FINRA Violations

Securities fraud claims are governed by FINRA's Code of Arbitration Procedures for Customer Disputes. Rather than pursuing a lawsuit in court, investors who believe they have suffered financial losses as a result of securities fraud must bring their case before a FINRA arbitration panel. Different from court, FINRA arbitration is not tried before a judge and jury. Instead, an arbitration panel made of 1-3 professionals hears testimony, examines evidence, and announces a binding decision to resolve the case. In some cases, filing an appeal may be possible after losing a FINRA arbitration case. Some cases also may be resolved through FINRA mediation.

Securities Fraud Lawyers

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