When might a broker be recommending unsuitable investments?


In New York, Puerto Rico and across the nation, people who are considering how to invest might be concerned they are not equipped with the knowledge necessary to do so safely. They will subsequently rely on industry professionals. Those in the financial industry are expected to have certain levels of knowledge to help clients make wise and reasonable investments and live up to ethical standards. Unfortunately, where often large sums of money are concerned, it is not uncommon for investors – experienced and inexperienced – to trust a stock broker or investment adviser who does not have their best interests in mind. Having legal protection after this has happened is wise.

Understanding the suitability laws

There are laws that address suitability of investments. These are in place to protect investors. If they are violated, there could be legal recourse. According to the Financial Industry Regulatory Authority (FINRA), those providing an investment strategy or advice must make sure that it is suitable stemming from information and assessment of the product and the customer. The customer’s goals, financial circumstances, age and other basics will be fundamental to the determination of suitability.

There are three obligations when assessing suitability. They are reasonable-basis; customer-specific; and quantitative. With reasonable-basis, the investment professional must have done due diligence and ensured that the investment was appropriate for at least some customers and that customers were aware of the risks and rewards. For customer specificity, there will be individual needs and concerns that must be met for the investment to be right for the investor. If it is not, the adviser must say so. Quantitative is for brokers with some form of control over the account. They must make certain that the investment does not exceed limits and is suitable in the greater context of the portfolio and investor’s profile.

For investment issues and illegality, having professional protection is imperative

People who invest will inevitably shoulder a certain level of risk. If, however, they lost money due to unsuitable investment recommendations and/or investment strategies, that constitutes actionable misconduct or possible outright fraud. Under those circumstances there are avenues to seek justice and hold people accountable. Financial losses that occurred because of unsuitable investments recommended by financial professionals should not be tolerated. For assistance with unsuitable investments and with seeking financial recovery, having experienced assistance to uncover what happened and more forward with a case is a vital first step.