stock broker fraud


Breaking Down Stock Broker Fraud

As you know, investing in the stock market can be a risky proposition. Markets and investments can fluctuate, and the majority of investment losses result from such fluctuations, rather than from stock broker fraud or misconduct. However, stock fraud does happen, and you should understand common forms of stock broker misconduct.

If you suffer loss of your savings due to one of the following common forms of stock broker fraud or misconduct, it is not your fault and you may have a right to recover losses. Contact the Consumer Justice Group immediately if you have experienced any of the following forms of fraud in dealings with your stock broker:

  • Unsuitability

  • Overconcentration

  • Churning

  • Unauthorized Trading

  • Misrepresentation/Omission

Unsuitability: This is perhaps the most common of investor claims. Before making investment recommendations, your broker has an obligation to attempt to learn accurate information about your financial needs. Based upon that information, your broker has an obligation to make only those investment recommendations that are in line with or suitable for your needs.

Overconcentration: Failure to diversify a client's portfolio can be a form of stock fraud. In order to protect your savings, your broker should vary the types of stock purchased rather than placing all your assets in a small number of stocks or a single economic sector, such as high risk technology stocks.

Churning: If you notice your broker has bought and sold the same stock two or more times in a month, you may be the victim of excessive trading or churning. Each time a stock is bought or sold, your broker earns a commission, often against your best interests as an investor.

Unauthorized Trading: This type of fraud occurs when your stock broker makes trades on your account without your prior authorization. Your broker must get your consent before any of your stock is sold or new stock bought.

Misrepresentation/Omission: Misrepresentation of various forms is seen in many of the cases detailed on this site. This form of stock fraud occurs when your broker intentionally gives you misleading information regarding stocks, such as making guarantees regarding stock performance or failing to accurately disclose a stock's risk.

Did your broker:

  • Put your retirement savings in risky technology stocks?
  • Advise you to buy on the margin?
  • Invest most of your savings in a few "hot" stocks?
  • Buy and sell the same stock more than twice?

Contact the Consumer Justice Group immediately if you have experienced any of these forms of fraud.

The Investment & Stock Fraud News is a service of the Consumer Justice Group.
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