Stock Broker and Financial Advisor Misconduct

Understand When a Broker Mishandles Your Investments

When investment professionals (including stock brokers, financial advisors, and investment advisors) or brokerage firms engage in misconduct or act against their clients’ best interests, they may be held legally responsible to investors who suffered substantial losses. Investors who have been misled or otherwise wronged by their broker or brokerage firm have the right to pursue legal claims to recover money lost.

Broker or Financial Advisor Cause You to Lose Money?

Speak with an attorney to find out if you can recover your losses. All consultations are free and confidential.


Common Examples of Broker Misconduct

The following are some of the most common types of broker misconduct that give rise to legal claims allowing you to sue your broker or brokerage firm. This is not an exhaustive list; if you have questions regarding your broker’s potential misconduct or believe you have been targeted by an investment scam, our attorneys can work with you to evaluate your potential claims.

• Unsuitability• Penny Stock Fraud
Unauthorized Transactions• Churning (excessive trading)
Ponzi Schemes• Mutual Fund Fraud
Over-concentrationLack of Supervision

Unsuitable Investments or Recommendations

Stock brokers, investment advisors, and financial professionals have a duty to understand their clients’ financial circumstances and to recommend only suitable financial products or trading strategies based on their clients’ desired level of risk. Investment professionals who recommend unsuitable investments can be held liable when their recommendations result in major losses.

For example, a stock broker putting an 80 year old investor into 20 year bonds or highly speculative stocks can be considered an unsuitable investment.

Overconcentration/ Failure to Diversify

A diverse investment portfolio can protect investors from excessive losses in a single sector or type of investment. A properly diversified portfolio includes investments in different companies, different market sectors, and different types of investments. If a broker or financial advisor fails to diversify an investor’s portfolio it can create an excessive risk of loss, which is known as overconcentration. Overconcentration of an account is not suitable for most investment portfolios.

Common examples of over concentration include:

  • Investing too large a percentage of the client’s portfolio in a single company
  • Investing too much in a single market sector (such as technology, healthcare, pharmaceutical, etc.), leaving the investor at risk with normal market fluctuations
  • Investing in only one type of security, such as only common stocks (including mutual funds that invest in common stocks) rather than a mix of common stocks, preferred stocks, and debt instruments (bonds)

Churning/ Excessive Trading

When a broker or financial advisor performs excessive trades to generate commissions, this is known as “churning” and is a violation of the law. Brokers who engage in churning can be held liable for the commissions paid and losses associated with the broker’s recommendations.

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Other Examples of Broker Misconduct

  • Failure to Execute or Follow Instructions
    Failing to promptly follow an investor’s directions to buy or sell securities
  • Forgery
    Falsifying investment documents and account statements, including client signatures
  • Material Misrepresentations and Omissions
    Mischaracterizing or failing to disclose important information about a recommended investment, typically information about significant risks

Take Steps To Recover Your Investment Losses

If you think your broker took advantage of you or a family member, there are steps you can immediately take to fight back:

  1. Don’t delay
    Every legal claim has a certain amount of time in which you must file a lawsuit (known as a “statute of limitations”). If you don’t act within that time period, you may lose your ability to sue your broker. Sometimes when investors discover that they have been defrauded, they feel embarrassed and ashamed; this can paralyze people and prevent them from seeking help or taking quick action. Reacting rapidly when you discover a possible fraud is incredibly important because the passage of time may affect your rights.
  2. Gather your documents
    Financial statements, stock trades, customer agreements, emails, and other correspondence with your broker could be relevant and useful.
  3. Consult with an experienced financial fraud lawyer
    Our skilled financial fraud lawyers can conduct an account audit to determine the full extent of your damages and determine whether misconduct occurred. Brokers or financial advisors who commit one type of fraud or scam often don’t stop there — understanding the full extent of the harm is critical to determining how best to proceed.

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Our Financial Fraud Experience

Gibbs Law Group’s financial fraud and securities lawyers have more than two decades of experience prosecuting fraud. Our attorneys have successfully litigated against some of the largest companies in the United States, and we have recovered more than a billion dollars on our clients’ behalf.

We have fought some of the most complex cases brought under federal and state laws nationwide, and our attorneys have been recognized with numerous awards and honors for their accomplishments, including Top 100 Super Lawyers in Northern California, Top Plaintiff Lawyers in California, The Best Lawyers in America, and rated AV Preeminent (among the highest class of attorneys for professional ethics and legal skills).
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Our Securities Arbitration Team

Scott Silver

Scott focuses his law practice on securities arbitration and litigation and plaintiff-side class action litigation, representing individual investors and institutions in claims against brokerage firms, investment advisors, commodities firms, hedge funds and others.

Eileen Epstein Carney

Eileen is involved in the firm’s securities practice and has over a decade of experience in the legal world. She received her law degree from American University in 2005.

Dave Stein

David’s advocacy has generated major recoveries for consumers impacted by financial fraud. He was named to the Top 40 Under 40 by Daily Journal and a “Rising Star in Class Actions” by Law360.

Amanda Karl

Amanda is spearheading a securities lawsuit against NantHealth concerning fraudulent statements to investors about the success of its key product.