Stockbrokers play an important role in the financial management of their clients. A New Yorker may rely on their broker’s advice to make sound decisions about where and with whom to place their hard-earned money. When a broker fails to act in their client’s interest as a fiduciary, their client can suffer significant financial losses.
Mistakes and intentional acts on the part of stockbrokers can result in legal and financial consequences. This post will explore five common kids of stockbroker misconduct. When any of these significant problems occur, victims can seek the counsel of knowledgeable attorneys for help.
Readers are reminded that no part of this post represents legal advice.
This blog has discussed churning in the past. Churning happens when a broker asks their client to make frequent trades. Often brokers make commissions based on the number of trades their clients make, and churning is a bad practice that costs clients’ money.
2. Bad advice
As stated, a stockbroker is a fiduciary to their client and is tasked with acting in their best interests. Brokers who make recommendations that do not fit in their clients’ goals or financial capacities may be engaged in misconduct.
Conversion is a fancy word for theft. When a stockbroker coverts their client’s funds, they outright take their client’s money. Conversion is a crime as well as misconduct.
4. Fraud and misrepresentation
Stockbrokers may not mislead or guarantee income or protection from losses on investments. When a client relies on the representations to their detriment, their stockbroker may be guilty of fraud if that broker knew that their representations were wrong when they made them. Like conversion, fraud is also a crime.
5. Failure to supervise
Brokers are fiduciaries to their clients, but brokers are supervised by the brokerage houses that employ them. A brokerage house’s failure to oversee their brokers’ actions can expose them to liability for their brokers’ misdeeds.
Broker misconduct is serious and costly. Individuals who have suffered losses due to the bad acts of brokers may have legal rights. Securities attorneys may be able to help them protect their interests.