Suffering a loss in investments is a devastating issue that requires a skilled investment loss lawyer to help you recover what is yours. Investors are in business to make money, and they know where to spend and how much to invest. Sometimes they may see the perfect investments but lose out because they did not realize the corruption waiting on the other side of the fence.
It is always a gamble, but it becomes a legal matter when investors lose through unauthorized trades and misrepresentation from a broker. The chances are high that it is not only one investor but many who may have lost their money through this misrepresentation. An investigation will always occur, and if the broker is guilty of any illegal activity, they will suffer the consequences.
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Misrepresentation and Breach of Contract
The Financial Industry Regulatory Authority (FINRA) regulates deals between a broker and an investor. They make the rules that protect the investor when the broker or financial advisor abuses their power and right to invest in their client’s deals.
The primary purpose of a financial advisor or broker is to ensure the money is invested where it should be and doing what it is supposed to be doing, which is making money. Before the broker can handle the customer’s account legally, a customer’s written authorization must go into effect as the broker’s written agreement to manage all the funds appropriately invested. The member firm must also approve the broker’s authorization.
There is trading that the broker buys and sells without the knowledge or permission of the client, known as discretionary trading. This method is where all parties can suffer from this type of trading in the long run. It is also the foundation of litigation where misrepresentations and contract breaches occur. Excessive trading is when a broker has control of the client’s account and works off of commissions taking chances with certain investments that are no good, so they can get paid. They may make money initially, but the loss is significant when it crashes, and the broker knows this. They abuse their power over the customer’s account and end up losing all of their money when they have the responsibility to recommend strategies. This step is overlooked when the agreement is made, leaving the broker in complete control without seeking permission to move the funds and investments around.
What Can An Investment Loss Lawyer Do?
An investment lawyer can begin the litigation process due to misrepresentation and contract breach. The brokerage firm must have a reasonable basis for the decision of the transactions other than they wanted to maintain their commission. Financial advisors must only provide or suggest suitable trade options that favor the customer’s investment. Once these investments are lost, the customer has the right to sue to get their investment losses recovered.
The attorney will follow the regulations of the FINRA and come up with an investigation with the authorities and work to take down the financial advisor and the firm. This type of stuff happens more than people realize because the firm gets greedy. There are times when the investments are a bust, and the market crashes. The first thing that will get investigated is if the transaction is legit and reasonable. There would be no case if it were in the vicinity of the client’s needs.
Examples of Fair Trade and Unfair Trades
Some examples would be if the customer wants to invest in Apple computers and the broker sees other potential options, like another brand or type of technology in the range of investment, they may use the funds legally to invest in the product or stock. The commissions go by the percentage of what is gained in the market. The broker made a fair deal whether the stock does well or not. Perhaps how much was invested, the customer may seek redemption over, but the trade was deemed suitable.
An unfair trade would be taking the money and investing in cruises or other sectors that have nothing to do with computers or technology. Multiple transactions of this sort will raise red flags and cost the entire firm a hefty fine and possible jail time. Everything goes excellent commission-wise for the firm, and it may never get the firm caught, but as soon as the market crashes, they have to answer. They will also have to explain the transactions as to why they invested. Many financial firms have fallen to this temptation.
The Penalties
Audits and investigations will take place. If the firm is determined guilty, sanctions are implemented from fines to disbarment to jail time. Below is the range of fines the firm must pay if caught:
- First offense: $5,000 – $16,000
- Second offense: $10,000 – $17,000
- Continual offenses: $10,000 – $155,000
Continual offenses for the firm will lead to suspension for thirty business days. If it continues, up to two years or the complete shut down of business.
The financial advisor has their share of punishment too. They can face suspension up to thirty business days for the first and second offense. Every offense after will have them suspended for two years or barred.
Some cases that went entirely against the FINRA to the fullest extent met fines up to $310,000, the individuals barred and closed the firm.
It’s Not Worth It
Looking at all the money made from commissions is not worth the illegal actions of taking a customer’s money and poorly investing. The fines are steep, the loss of license is inevitable, and the trust lost can never get repaired. Through the investigations, the attorney will fight for the customer, and justice will be swift.
