Houston Stockbroker Fraud Attorney
About Cases Involving Stockbroker Fraud
When a stockbroker places their own or the brokerage firms interests above the interests of their client, they violate their fiduciary duty and may be guilty of stockbroker fraud. Investing in anything can be risky. Investment losses are common and usually the result of normal market forces. However, when investment losses are the result of wrongful action or stockbroker fraud, those responsible should be held accountable.
Stockbrokers and brokerage firms have a fiduciary duty to their clients that includes a responsibility of care, disclosure, and loyalty. They have a legal and ethical obligation to put the financial interests of the client ahead of their own. When stockbrokers and brokerage firms violate their fiduciary duty by giving inappropriate or unethical advice, they are engaging in stockbroker fraud. A stockbroker has a fundamental responsibility for fair dealing.
The securities industry requires a stockbroker to treat his customer in a fair and honest manner. Stockbroker fraud can be as subtle as giving bad investment advice or recommending risky investments without explaining the risks, or as overtly fraudulent as making trades without your authorization or excessively trading your account.
Duties Imposed on Stockbrokers
Securities laws and the rules of self-regulatory organizations impose the following duties on stockbrokers:
- Fiduciary Duty - Fiduciary duty is the responsibility of care, disclosure and loyalty that a broker / brokerage firm has the obligation to provide to its customers. It is known as the duty of loyalty.
- Duty of Disclosure - A stockbroker must disclose all material information related to investment recommendations, including informing them of clear measures of risk for a specific time period; informing them of conflicts of interest in a financial relationship between an investor and their broker-dealer or account representative; and informing them when an investment is inappropriate for their objectives and tolerances.
- Suitable Recommendations - The duty to give suitable recommendations requires that all investment recommendations be consistent with the customer's financial and tax status, investment objectives, level of understanding, and risk tolerance. This obligates a stockbroker to maintain an accurate and up-to-date profile of their clients. Furthermore, a broker must refrain from making an unsuitable recommendation even if the customer has expressed interest in it or asked for the recommendation.
- Duty to Prevent Financial Suicide - Stockbrokers and other investment professionals have a duty to refuse unsolicited transactions when they are inappropriate or inconsistent with the financial condition of their client. This means that a stockbroker must not automatically do whatever a client asks. And when asked by a client to do something that is inconsistent with their financial condition, the broker has an affirmative duty to refuse.
Contact a Houston Stockbroker Fraud Lawyer
Stockbroker fraud occurs when a broker recklessly disregards the investment objectives and risk tolerance of his or her client, and engages in behavior that violates their professional duties. If you have incurred a substantial financial loss because of stockbroker or brokerage firm fraud, we can help you understand your options for claiming compensation for your loss.
For a free consultation, contact a Houston stockbroker fraud attorney today.