SEC allegations show savvy investors not insulated from victimization


Investing inherently involves risk. Yet, while investors may not be protected from the natural ups and downs of the market, they should never have to lose money to illegal conduct by their brokers or advisors.

Even savvy investors can lose money to broker misconduct. Those who abuse their positions and cause loss to investors can face legal action from investors who wish to recoup their losses, and may even be the subject of criminal charges from the government. In one recent high profile case out of New York, a former trader of residential mortgage-backed securities could be facing both types of legal action.

Highly sophisticated investors reportedly duped by New York broker

On January 28, the Securities and Exchange Commission filed an indictment against Jesse Litvak on charges of lying to investors. Parallel civil charges accusing Litvak of fraud were also filed.

Among Litvak’s customers in the Wall Street transactions that led to the charges were leading investment advisors who manage billions of dollars. Litvak stands accused of a rather simple act of misconduct: telling clients that the cost of residential mortgage investments was higher or lower than what he paid for them, depending on which side of the transaction his firm was on.

Unlike stocks that are traded on an open market, discovering a market price for mortgage based securities is difficult. Because the market for these securities is so opaque, investors must typically rely heavily on information provided by their broker.

“The kind of false claims made by Litvak were unfit for a used-car lot, let alone a marketplace for mortgage-backed securities,” George Canellos, the deputy director of enforcement at the SEC told The New York Times.

Victimized by your broker? Get in touch with a securities litigation lawyer

Although the outcome of the cases against Litvak remains to be seen, the facts surrounding the incidents in question go to show that even sophisticated investors are not immune from the fallout caused by broker misconduct.

It can be easy for those who have suffered losses at the hands of their brokers to feel like they should have caught the errors earlier or realized that something was amiss. But, particularly when dealing with securities traded in opaque transactions, even professionals in the financial field have little choice but to depend on honest and frank answers from their brokers.

If you have been the victim of broker misconduct, you may be able to recover a substantial portion of your losses. Contact a New York securities litigation attorney today to explore potential legal remedies.