Did my broker live up to their professional responsibilities?  


When people invest through a stockbroker, they are putting their trust in that individual to follow the law and live up to their responsibilities as a professional. In recent years, it has become much easier for retail investors to take part in the market. That has been positive in many ways as people who otherwise might not have derived the benefit from investment have been able to do so.

Still, investors are still at risk of losing their money if they make mistakes in whom they trust. They might not be aware of the duties a broker is required to live up to when representing a client’s interests.

When an investor suspects that a stockbroker has engaged in illegal activities, there are options available to try and hold them responsible. Knowing how the Financial Industry Regulatory Authority (FINRA) defines broker duties is important to catch brokers who violated the law.

What are brokers required to do for their customers?

Brokers are expected to behave in an ethical manner with their customers. That includes dealing with them fairly and knowing their objectives. For example, a responsible broker would not make reckless trades for a conservative investor who is living on a fixed income and is simply trying to make incremental profit through safe avenues. Putting significant money in a new and questionable stock would be an example of violating that trust.

There will be investments that are suitable and unsuitable for investors. Recommending the investor go for a high-risk/high-reward investment when the investor’s goals do not fall into that category is an example of an unsuitable investment.

Of course, there are investors who are willing to take more chances. The broker must discuss this with the investor and know what they want to achieve and their tolerance for ambiguity.

Information must be disclosed honestly and in full. Some brokers may want to maximize profit for the investor and themselves through aggressive practices like margin trading, day trading and options trading. If the investor is onboard with these practices, this is fine. If not, then the investor could have cause for complaint for the broker’s behavior.

The customer should provide instructions as to how they want to invest. Some brokers are given discretion through a certain type of account. Apart from that, the investor must grant permission for their orders.

Excessive trading is an example of a violation that is designed to accrue profit for the broker. If the broker gets paid via commission, some might trade repeatedly to earn more money for themselves with little interest in how it impacts the customer.

What to do if you suspect misconduct

There are seemingly endless stories about how stockbrokers flout the law to try and maximize their own benefit. Investors should make sure they know who they are investing with beforehand. However, even reputable companies have had past transgressions that led to sanctions from the Securities and Exchange Commission and other enforcement entities resulting in penalties.

When there is suspected broker misconduct or overt proof that it has taken place, it is wise to have experienced assistance to hold them accountable.