Stockbroker Fraud Still an Issue in 2012

It has been four years since the economic disaster of 2008 and while the market has begun to steady, the financial hardships that were left in its wake have far from recovered. What many consumers fail to realize, however, is that the losses they have suffered within the past several years may not be due solely to the market decline. Financial losses caused by poor investment advice or the negligence of investment advisors could go undetected at times when the health of the market can easily be blamed.

More than ever, investors need to protect themselves from investment fraud and misconduct. They need to be knowledgeable about the tactics used against them so they are better equipped to prevent any wrongdoing, and victims of investment fraud or misconduct need to understand that they may be able to recover some or all of their losses. The number and scope of investment fraud and misconduct incidents that followed the market failure in 2008 is staggering. In a mere three and a half month effort, the Federal Fraud Enforcement Task Force uncovered direct-to-investor fraud schemes that targeted more than 120,000 investors and caused over $8 billion in losses. It is also estimated that over 30 million Americans are defrauded each year. Investors place their utmost trust and often their lifelong savings in the hands of financial professionals who they believe are working on behalf of their best interests. Unfortunately, this is not always the case.

The Unsuspecting Victim 

Anyone can fall victim to investment or securities fraud; however, brokers and advisors often target older males who are financially literate and well educated. Many have built up sizeable retirement funds from years of disciplined saving and prudent investing and according to the National Association of Securities Dealers (NASD), investment fraud victims score higher on financial literacy than non-victims. Victims of investment fraud and misconduct are also likely to let their losses go unreported and often blame themselves for the investment errors. According to the FINRA Investor Education Foundation, only half of known investment fraud victims ever admit to losing money. With this statistic alone, the importance of financial skepticism and education is illuminated. It is imperative that investors understand the ways in which they can be targeted so they are able to identify the signs of misconduct before their life savings disappears.

The Anatomy of Investment Fraud and Misconduct

If you are presented with an investment opportunity that seems too good to be true, it most likely is. However, not all fraud schemes are easy to identify. Misconduct can often be embodied in investments with little to no risk and the promise of guaranteed returns, appealing to the older, more risk averse demographic or through investments with complex strategies designed to intrigue those with a heightened risk tolerance. Regardless of the tactic, the end result is the same: your broker, advisor or investment firm earns commission and dividends at your expense. Other common types of misconduct include:

• Making Unsuitable Recommendations – You are advised to sell or exchange a security that is not suitable given your financial situation and needs
• Overconcentration – Your broker or advisor invests most or all of your money into one investment or asset class resulting in a lack of portfolio diversification
• Misrepresentation and Omission – You are knowingly offered inaccurate, incomplete, or biased information
• Churning – Your advisor or broker makes excessive trades within your account in an effort to generate commissions without adhering to your financial goals.
• Failure to Execute – Your advisor or broker fails to execute your requests in a timely manner
• Selling Away – You are recommended an alternative investment that is offered by a person or entity other than your brokerage firm and has not been reviewed, approved or recommended by the firm

Do Your Research 

In addition to understanding the different types of misconduct, a prudent investor should be sure to conduct the appropriate research prior to working with an advisor or brokerage firm. The Securities and Exchange Commission and FINRA offer ample resources for investors searching for information about the professional background of their brokers and advisors. The license status or your broker, brokerage firm or advisor as well as their involvement any past or pending arbitrations and complaints is public record and can be found by searching the SEC’s database or FINRA’s BrokerCheck online tool.

Can My Losses Be Recovered? 

Advisors and brokers have legal duties to their investors that are well defined by the laws governing securities dealing and investing. At Sokolove Law, we have over 30 years of experience in assisting victims of investment fraud and misconduct and we are ready to help in your fight to recover your losses.

If you’ve lost a substantial amount of money in your investments and believe you’ve been a victim of investment fraud or misconduct we urge you to challenge those who put profits and greed ahead of people by taking action today. Call Sokolove Law at  800-561-7154 and speak with an experienced investment fraud lawyer for a free no-obligation legal consultation.

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