Broker-Dealer Abuses

Both the individuals and institutions involved in the buying and selling of securities must comply with strict rules regarding the investment advice they give as well as the actions they take with client money. Broker-dealer misconduct that may be addressed in securities litigation includes some of the following.

• Churning
  A claim for churning may exist when a stockbroker executes excessive trading on a client's account in order to boost commissions. Investor losses occur from added broker fees as well as poorly timed trades.
  
  
• Unauthorized Trading
  Brokers may not execute trades without investor authorization or in direct contradiction of a client's order.
  
  
• Misrepresentation and Omissions
  Misrepresentation and omission occur when a securities firm or individual broker purposefully gives out wrong information, or conceals true information.
  
  
• Unsuitability
  Broker's who make investment recommendations that are inappropriate to the known objectives and background of a particular investor may be subject to claims for losses based on unsuitability.
  
  
• Misappropriation
  Misappropriation occurs when a broker sells a client's accounts and keeps the proceeds for him or herself. Investors may be able to bring a claim to the brokerage firm that employs a broker who engages in misappropriation because of negligent supervision or based on the legal doctrine that makes employers responsible for the acts of their employees.

Investment Scams

Con artists continue to use old-fashioned tricks and tactics to dupe investors with fraudulent investment schemes. Increasingly, they are using technologies like the Internet and telecommunication to help them defraud investors. Investors, usually senior citizens, are tricked out of savings through the use of high pressure sales tactics and unrealistic promises of huge financial returns from securities investments such as stocks and bonds, oil and gas leases, or limited partnerships.

Options for Securities Litigation

Investor claims arising from securities related losses may occur in different kinds of actions. Investors may be able to bring a lawsuit in state or federal court against the person, company or companies that caused their losses. Investor claims may also be resolved through participation in a class action lawsuit or through arbitration. Investors may not always have a choice as to the forum in which they get to bring their complaint.

• Securities Class Actions
  When a group of investors share a common injury because of securities associated wrong doings, they may be able to participate in a class action. Common securities class actions arise from company abuses like insider trading and failure to properly document earnings.
  
  
• Arbitration
  Many investors are unaware that the paperwork they sign upon retention of a broker requires them to resolve any claims related to the broker's activities in arbitration. The National Association of Securities Dealers (NASD) provides services for a large number of securities related arbitrations. While investors originally believed that arbitration was skewed in favor of brokers, recent statistics show investors often fare well in securities arbitrations, particularly when an attorney represents them.

Conclusion

Members of the securities industry must provide accurate information to the individuals and institutions that are their investors. Federal laws and regulations dictate strict standards for accounting, information disclosure and the handling of investor assets. When violations of those standards occur, injured investors have the right to pursue securities litigation claims.

Securities litigation requires a detailed understanding of the controlling laws, regulations and industry standards. Determining where to bring a securities related claim is often as complex as determining what claims should be brought. For that reason, when considering securities litigation, you should contact an attorney with experience pursuing members of the securities industry so that you may fully understand your rights and protect your financial interests.