What are some examples of broker misconduct?


Whether you are new to investing or have decades of investing under your belt, you may choose to have a broker handle your financial affairs and make critical investment decisions on your behalf. Unfortunately, some brokers put their own interests above the interests of their clients and end up costing their clients thousands of dollars.

If a broker is handling your money, keep an eye out for these common forms of broker misconduct:

  • Breach of fiduciary duty: Failing to always act in the client’s best interest.
  • Poor recommendations: Failing to consider the investor’s circumstances when making investment recommendations.
  • Failing to provide information: Misrepresenting facts or omitting information the client needs to know to make investment decisions.
  • “Churning” or excessive trading: Engaging in excessive trading to increase a  commission.
  • Unauthorized trading: Failing to follow your instructions or exercising their own discretion without your authorization.
  • Fraud/misappropriation: Misusing your funds for personal use.

Brokers are legally and morally obligated to handle their client’s money with care and always act in the client’s best interest. However, a few bad investments do not necessarily mean your broker is breaking the law.

If you suspect your broker is engaging in broker misconduct, your first instinct may be to go to your broker to resolve the issue. Realistically, your broker will not admit to any wrongdoing or will offer you a meager sum of money to resolve the problem.

Many investors find that the best first step is to contact an attorney specializing in these matters. An attorney can review your case and help determine whether you have a valid claim for damages.