As a stock market investment, your financial advisor and brokerage firm owe you certain legal duties and responsibilities when you entrust them to manage your hard-earned monies. Unfortunately, they don’t always do the right thing, and may act in their own self-interest at your direct financial expense. It is not always easy to spot. Pay attention to the following warning signs and seek legal counsel if you believe you have been defrauded.
Warning Signs
• You receive confirmations of securities transactions you did not authorize.
• Your account is consistently losing money in a rising market.
• You are paying significant commissions for activity you do not understand.
• Your stockbroker is recommending the use of margin and aggressive, speculative strategies, including options trading and/or penny stocks.
• Your financial advisor recommends complex structured products that you do not understand.
• Your broker becomes hard to reach and fails to return phone calls when you inquire.
These are just a few of the warning signs to keep an eye out for, but many more exist.
The Legal Elements of a Securities Fraud Claim
Under the law, fraud is more than just a lie or miscommunication. In order for you to prove you have been defrauded by your brokerage firm and recovery money, you must satisfy four criteria.
• Misrepresentation or Omission of Material Fact. The core of any fraud claim is a misrepresentation and/or omission of a material fact made in connection with the investment transaction.
• Intent. The stockbroker making the material misstatement must either intend to deceive when making the statement, or must be extremely reckless when doing so.
• Reasonable Reliance. The securities investor must reasonably rely upon the representation when acting upon it. A classic example is an investor who purchases a risky penny stock based upon the financial advisor’s representations that it is a safe and suitable investment.
• Damages. Finally, you must be able to prove you have suffered damages as a direct result of the misrepresentation and/or omission. In an investment fraud case, the investor must establish that he lost money as result of the deceptive statements or acts of the financial advisor.
For more information on securities and investment fraud and your rights, contact the Law Firm of David R. Chase.
