Columbia Securities & Investor Disputes Lawyer
Investment professionals or financial advisors and firms owe specific duties to their customers, including recommending appropriate, suitable investments. At Simmons Law Firm, we have represented customers in court and in arbitration proceedings to assist investors in recouping losses. As experienced litigators, we are always ready to stand up for working individuals and families when they have been harmed by another’s negligence or misconduct. If you were hurt financially because of bad advice from a broker that put you into a bad investment, you might be able to recover from those losses.
Below are some of the different ways investors can be harmed by negligent or unscrupulous brokers. Call our office in Columbia if you have been a victim of Columbia securities fraud or other financial misdealings in South Carolina.
Unsuitable Investments
The single most important duty of a broker or brokerage firm is to recommend suitable investments to the customer. It is the broker’s job to know the customer’s needs, investment goals and risk tolerance and to recommend investments accordingly. This isn’t just some ideal. The agency in charge of regulating investors (FINRA) has an actual rule (Rule 2111) known as the Suitability Rule. Every broker and brokerage firm knows this rule, and there is no excuse for violating it.
For example, recommending a risky investment to a retired couple on a fixed income with limited assets is likely a violation of the suitability rule. Brokers must know their customers, the stocks or other financial products they sell, and match the two together. Brokers are required by Rule 2111 to have a reasonable basis for every recommendation they make, and a reasonable basis to believe the investment is suited to the customer. When brokers violate this rule, they can be held liable for the financial losses and other related harm their conduct has caused.
Overconcentration
There is a good reason not to put all your eggs in one basket when it comes to investing; it’s too risky. Having a diversified portfolio is key to sound investing, and every broker knows this. Even so, brokers might have their favorite stock or sector that they recommend their customers to overly invest in, sometimes even against their firm’s guidelines. Having too much invested in a single stock, a single sector, or a single asset class can be unsuitable for the investor. Even having too much invested in mutual funds can be harmful if the portfolio is not properly diversified.
Churning
Churning occurs when a broker goes into a customer’s account and engages in excessive trading – buying and selling stocks – merely to generate commissions and fees for the broker or brokerage firm and not for the benefit of the investor. Churning is easy to spot if you are a conservative investor, but if your strategy is more aggressive, it can be harder to tell if your broker is engaging in excessive trading to your detriment. We’ll be happy to look into the matter for you if you are concerned something unethical is going on with your investment account.
Omitting Important Information
It should go without saying, but brokers are required to provide their customers with truthful, material information so they can make reasonable decisions about their investments. Brokers can be liable for making material misrepresentations about investments as well as failing to disclose information that would be important for a reasonable investor to know before committing to a particular investment. Brokers who intentionally downplay a risk, oversell a stock’s performance, misrepresent the financial stability of a company, or hide important details about an unsuitable investment can be guilty of securities fraud and liable for damages.
Structured Products
Structured products such as structured CDs and notes are very complicated and highly risky investments that are rarely suitable for most retail investors, in particular senior citizens. These investments often are sold as paying above-average yields. However, the promised rates are usually only in the first year, i.e. a teaser rate. In subsequent years, the income payments decline, but investors are locked into the product and will suffer significant losses if the investment is sold prior to maturity. Structured CDs, notes, and non-traded REITs are often unsuitable for retirees with short time horizons, and brokerage firms can be held responsible for recommending them to their customers.
Simmons Law Firm is experienced in filing arbitration claims with the Financial Industry Regulatory Authority, Inc. (FINRA) on behalf of numerous South Carolina residents alleging that companies mismanaged their investment accounts by recommending high-risk and illiquid structured CDs, structured notes and non-traded REITs.
Contact Our Dedicated South Carolina Securities/Investor Attorneys
Have you suffered financial losses that you believe resulted from improper advice of an investment advisor or firm? Bring your concerns to Simmons Law Firm as soon as possible, as there are strict laws that limit the time in which you can make claims. We offer you a free consultation to discuss your case, and once you agree to work with us, we can get to work preserving the evidence, and start the investigation on your case as soon as possible. Get started today by calling 803-779-4600 or toll-free at 888-715-8818, or contact us online.
