Frequently Asked Questions

Can I Recover Investment Losses?

The short answer is “yes” if your financial advisor or brokerage firm did not act in your best interest in connection with an investment-related recommendation.

What is a Financial Advisor’s Standard of Care?

Many investors believe that financial advisors and broker-dealers have a fiduciary duty. However, that is not always the case. When a financial advisor or broker-dealer makes an investment recommendation, the investor is entitled to a recommendation that is in the investor's best interest, and that does not place the interest of the financial professional or financial institution ahead of the interests of the retail investors.

What Constitutes an Investment Recommendation?

A financial advisor’s investment recommendations must be in the investor’s best interest. The “best interest” standard of care applies to recommendations to purchase, sell, or even hold an investment. It also applies to recommendations to implement, exit, or remain invested in an investment strategy. Finally, it applies to a financial advisor’s recommendation of the type of account to open.

When is an Investment Recommendation not in an Investor’s Best Interest?

The answer to this question is dependent on the specific facts and circumstances surrounding the recommendation. However, common investor allegations include the following:

  • Suitability: A recommendation is not in the best interest of an investor when the investment recommendation is not suitable for the investor. For example, when a financial advisor recommends the purchase of a risky investment to a conservative and risk-averse investor.
  • Misrepresentation: When a financial advisor misrepresents a material fact about an investment recommendation, that is not in the best interest of the investor.
  • Omission: Similarly, when a financial advisor omits a material fact about an investment recommendation, an investor may have a claim that the recommendation was not in the investor’s best interest.
  • Unauthorized Trading: If an executed trade was not authorized, including both buy and sale transactions.
  • Excessive Trading or Churning: The practice of executing an excessive amount of transactions in an investment account to generate commissions.
  • Elder Abuse: Financial elder abuse involves unfairly taking advantage of an elderly person, especially those with diminished capacity, and includes conduct such as the unauthorized use of an elderly person’s assets or engaging in fraud.
What is Financial Elder Abuse?

Elderly investors are vulnerable to fraudulent schemes that result in investment losses of irreplaceable savings. There are numerous ways elderly investors can be exploited, including elderly investors being targeted for fraud, such as “Ponzi Schemes.” Elderly investors may also be targeted by unscrupulous financial advisors who actively trade the accounts to generate commissions or sell illiquid high fee products such as privately traded Real Estate Investment Trusts (REITs) or annuity contracts.

What are the Most Common Types of Securities in FINRA Arbitrations?

According to FINRA Dispute Resolution Services recent statistics, the most common types of securities included in investor’s claims are:

  • Common stock;
  • Real Estate Investment Trusts (REITs);
  • Private equities;
  • Mutual funds;
  • Municipal bonds;
  • Options;
  • Limited partnerships;
  • Municipal bond funds;
  • Exchange-traded funds (ETFs);
  • Variable annuities;
  • Business development companies;
  • Annuities;
  • Corporate bonds;
  • 401(k) accounts; and
  • Government securities.
How do I Recover Investment Losses?

If you believe that you may have been a victim of securities fraud or other wrongful conduct by your financial advisor or brokerage firm, contact our experienced securities arbitration attorneys for a free and confidential case evaluation.

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