Investment Fraud Attorney located in Michigan, Peter C. Rageas
will fight for your rights!
Investment Fraud Attorney located in Michigan, Peter C. Rageas, will fight for your rights!
FREE Case Evaluation
20 Years Experience
Material Facts and Risks Must Be Disclosed in Investment Fraud Cases
The stock broker and the brokerage firm are required by law to make full and complete disclosure to investors of all material facts and risks that are inherent to the investments recommended. When neglected, investment fraud may exist.
The firm or the stock broker can be held responsible for investment fraud including, misrepresentations or omissions of material facts. Material misrepresentations or omissions made to the investor regarding the risk associated with making a particular investment can lead to a finding that the firm and broker are responsible for compensatory damages or losses sustained.
Contact Our Law Office Today!
Peter C. Rageas Michigan Attorney is tough on Stock Broker Negligence in Investment Fraud Cases
Fraud is not necessary in order to recover against a brokerage firm for investment losses. Firms and brokers can be held liable for their negligent actions and/or their negligent in-actions, related to investment fraud.
Stock fraud is the best-known form of securities and investment fraud. However, investors have lost money due to broker misconduct in a wide variety of investments including:
Mutual Funds Fraud
Real Estate Investment Trust Fraud
Mutual Funds Fraud
ARE YOU LOOKING FOR AN INVESTMENT FRAUD ATTORNEY?
Call Today We Got You Covered!
What is Investment Fraud, Misrepresentations and Omissions?
Churning and Stock Broker Fraud
Churning is Excessive Trading of an Account for the Purpose of Generating Commissions. In churning activities the trading will have no reasonable or rational basis that can be linked to the particular performance of the investments.
Calculations are made regarding the turnover rate, the annualized rate of return and the number of purchases and sales, among other things to determine whether churning has occurred.
The customer must prove that the broker exercised actual control over the decision making in the account, the trading was excessive, and that the broker acted in reckless regard to the customer’s best interest in order to prove churning.
Unsuitability of Investment and Stock Broker Investment Fraud
Reasonable Basis for Investment Required. A broker is required by law to have “reasonable basis” for investment recommendations that he makes. If a broker breaches any of these duties and makes unsuitable recommendations to the customer, he or she might be liable for losses sustained by their customer because of those investments.
A stock broker is not permitted to recommend or solicit a trade or investment strategy before determining that the recommendation is consistent with the customer’s: investment objectives, needs and risk tolerance, age, needs, etc (NYSE Rules 405, FINRA Rule 2311).
When making investment recommendations, brokers are required to obtain information from the customer that will allow them to make investment recommendations that are suitable for the individual’s investment objectives. A broker is required to understand an investor’s tolerance for risk, financial needs and time horizon.
In developing an investment plan for a client a broker must considered the employment status of the client, their age and health issues together with the tax implications of the investment
In some instances if the risks associated with a particular trade or investment strategy were properly and fully disclosed to you, the stock brokers recommendation may be found to be unsuitable for you as a specific investor if the investment is inconsistent with your stated objectives, needs and risk tolerance.
Stock brokers are required to observe the standards of conduct that are considered by law to be just and equitable principles of trade when dealing with investors (FINRA Rule 2010).
Overconcentration and Stock Broker Negligence
Diversification of Investments is required to avoid investment fraud. A fundamental concept of investing is diversification. Risk is statistically reduced by investing in assets of varying classes.
This lack of diversification of investment can result in “over concentration.” If a broker has invested his customer too heavily in any particular sector or in any particular investment vehicle, he or she is potentially liable for losses in that investment account.
Failure to Supervise and Stock Broker Liability
Liability Occurs for Failure to Adequately Supervise a Stock Broker. The failure of a brokerage firm to adequately supervise its stock broker may also result in liability for the brokerage firm itself.
Securities laws and FINRA rules require brokerage firms to reasonably supervise their brokers in order to prevent violations of the rules and regulations of the securities industry.
A brokerage firm must show not only that they had in place supervisory and compliance rules and procedures, but also show that they effectively implemented and enforced them so as to diligently supervise the activities of their brokers.
A brokerage firm might also be held liable for the acts of their agents under the statutory “control person” provisions and the common law doctrine of respondent superior whereby the employer is held liable for the wrongful acts of the employee acting within the course and scope of their employment.
Brokers must be properly licensed in the state where their clients are located. The firm is responsible for monitoring the trading activity, the type of investments and the asset allocation to assure compliance with the customer’s investment objectives and tolerance for risk.
An individual broker may have been placed under “heightened supervision.” This is the type of information discoverable during the arbitration process.
Stock Broker Breach of Fiduciary Duty
If a broker agrees to manage his or her client’s investments and they have discretionary authority to make decisions and trades without consulting the client, then they have fiduciary duties and responsibilities to that client.
A fiduciary duty is the highest standard of care at either law or equity. A fiduciary duty is a legal or ethical relationship of confidence and trust regarding the management of money between two or more parties.
The affirmative duty of good faith compels the fiduciary to place the client’s interest before his or her own interest. Exactly who is considered to be a fiduciary and what their duties are is determined by the laws in different jurisdictions.
When a broker agrees to execute an order, the broker and the firm have a fiduciary duty of best execution to not place the firm’s interest before the client’s and to execute the order at the best price available in the marketplace. The breach of fiduciary duty is considered to be fraud under the laws of most jurisdictions and as such is afforded certain legal benefits over other such claims as negligence. Can be considered investment fraud.
Stock Broker Breach of Promise or Contract
Contracts can be oral, written or implied by the actions of the parties. Most claims against brokers involve breach of both written agreements as well as oral promises.
When an investor meets with a brokerage firm and discusses his or her investment objectives, financial needs and risk tolerance, promises are made regarding the handling of the account. The investor pays consideration based upon those promises. As a result a contract is formed.
If the account is not handled in accordance with the promises made and investment losses occur, the investor might be able to recover for those investment fraud losses through legal action.
When investment accounts are opened at brokerage firms, a new account agreement is almost always signed. During this meeting, the broker will ask questions regarding employment, investing experience, financial situation, financial needs, time horizon and tolerance for risk, in order to determine how to invest and allocate the available assets. This agreement usually exists in addition to promises made to the clients.
Memberships and Affiliations
Our Investment Fraud Legal Services located in Michigan
Our Detroit Michigan based location offers affordable prices for a vast array of investment fraud services. In addition to broker security fraud, we also offer many other services including litigation, broker misconduct, securities litigation, and FINRA assistance.
You can find more information regarding security fraud and prevention tips at the Federal Bureau Investigation’s website. The Securities and Exchange Commission also offers great information – you can find it here; identifying and avoiding securities fraud.
Directions to our Law Firm
Investment Fraud cases – taken on contingency
Why does Peter Rageas work on a contingency basis? This gives our clients an opportunity to file a lawsuit against the negligent broker who caused your financial loss without spending money initially for the payment of attorney’s fees. This will also help those who need to file a case right away and not worry about a lack of money to finance the lawsuit.