Examples of broker misconduct to watch out for


Taking a broker’s expert advice requires a tremendous amount of trust. Many investors in New York take great care to work with brokers who are experienced, knowledgeable and trustworthy. Unfortunately, it is not always easy to spot broker misconduct, which can result in significant — and avoidable — losses.

Brokers are supposed to understand the importance of diversifying investments. Placing all of a person’s assets into just one specific industry or stock leaves him or her at risk for losing virtually everything. Someone who has lost money because his or her broker failed to diversify could choose to take legal action.

But there can still be huge losses even if a broker diversifies his or her client’s stocks. Churning is one such example, which involves excessively trading a client’s assets. Quickly trading stocks means that brokers do not have the opportunity to wait for opportune times or prices. Brokers generally turn to churning as a method to increase their own commissions, but clients often lose money in the process.

Brokers themselves may not be the only ones responsible for clients’ losses. Brokerage firms must supervise brokers, monitoring for any acts of misconduct or unsound practices. Some losses can be avoided when management at these firms simply fulfill their job duties by properly monitoring employees.

It is impossible to avoid losses altogether when investing, but careful action can reduce that risk. Broker misconduct of any kind increases the risk of losing significant amounts of money. When faced with this situation, some New York investors choose to file legal claims that hold brokers responsible for their actions.