The basics of securities litigation


There are different types of securities litigation claims that investors may be able to make when inappropriate or illegal actions beyond market factors result in securities losses. It is helpful for investors to be familiar with securities litigation basics so they can spot when something has gone wrong and know what to do if they have become a victim.

Securities fraud basics

There are several different situations that may lead to securities fraud litigation including:

  • Breach of fiduciary duty – when a broker violates their fiduciary duty due to their investor client, the client may have a claim for a breach of fiduciary duty.
  • Conflict of interest – a conflict of interest can potentially exist if the securities firm is engaged in both investment banking and stock analysis and brokerage to clients. This can influence their evaluation of particular securities and may create a conflict of interest the harms the client.
  • Churning or failure to diversify – an excessive amount of trades on the client’s account to boost commissions, or a failure to diversify the client’s portfolio, may lead to securities litigation claims.
  • Failure to supervise or malpractice – if the brokerage fails to supervise brokers committing wrongdoing on a client’s account or provides unsound that is incorrect, deceptive, or misleading they may face a securities litigation claim.
  • Insider information or market manipulation – of a brokerage is making trades based on insider information or is engaged in market manipulation, they may face securities fraud accusations for that activity.
  • Trading without permission, omission of facts or risky trades – whenever a broker trades without the client’s permission, engages in high-risk trading or omits material facts, they may leave themselves open to securities litigation.

Securities fraud can result in significant losses for victims that can impact their life savings or retirement savings. Securities litigation can provide legal protections in some circumstances that victims should be familiar with.