The attorneys at Gana Weinstein LLP continue to represent victims of misappropriation and theft at the hands of their broker or investment advisor. Most investors either believe that broker theft does not or cannot happen in the modern world or is so rare that it could not happen to them. Moreover, investors believe that brokerage firms would simply compensate and return stolen funds to clients.
However, none of these common misconceptions are true. Misappropriate and theft are not rare occurrences but in fact result in routine regulatory sanctions and even criminal convictions. Brokers have been convicted of stealing client funds in both large and small amounts. Brokers have stolen funds from only a single client or dozens of clients. In addition, when investors are the victims of theft, oftentimes the investor spends months trying to negotiate with their brokerage firm only to discover that the firm appears to have no real interest in simply doing the right thing and return the stolen funds. Unlike when you call up a credit card company concerning a fraudulent charge, brokerage firms routinely reject investor claims to recover stolen funds.
How Do Brokers Steal Client Money? Fake Investments (a/k/a Selling Away)Brokers employ numerous schemes to depart investors from their hard-earned savings. One method of tricking investors into allowing the broker to take possession of their funds is through recommending unregistered investments that their firm would not approve of. In the industry when a broker sells a product outside of the firm, either approved or unapproved by the firm, the conduct is called “selling away.” In selling away theft schemes the broker makes up an investment pitch but never actually invests the money. Thereafter, the broker may create sham account statements or have the investor open a self-directed account where the broker completely controls what the clearing firm tells the client about the value of the investment. The broker usually engages in Ponzi-scheme like behavior and other means of deception in order to prevent the clients from uncovering the theft of funds.
Other fake investment schemes involve the broker recommending real products like annuities, private placements, or stocks and then having the client write a check or send funds to an account the broker controls. The broker can then create fraudulent account statements while the funds were never really deposited with a legitimate investment firm.
Borrowing Money From ClientsBrokers also steal money from their customers by entering into lending arrangements. Often times the broker will draw up a promissory note or other contract to evidence the loan. Like with selling away, borrowing client funds can in some cases merely be theft in disguise. For instance, the broker may say that the promissory note is backed by the value of collateral or is to be used for a specific purpose that will generate funds that will pay back the note. The purposes of the loan can be misrepresented and in fact the funds could be simply taken by the advisor to satisfy their own debts and spending habits.
Like selling away, FINRA rules also strictly prohibit brokers from borrowing money from almost all customers unless permitted by the firm.
Elder Abuse and Financial ExploitationBroker theft often thrives when the broker’s clients are elderly and have some form of diminished capacity. In some cases, investment advisor uses a client’s diminished capacity to misappropriate funds or otherwise exploit that person’s assets. We have handled cases where brokers have inherited under a will. In other cases, brokers manipulate the sending of checks or otherwise insert themselves as bookkeepers where they can then steal funds pretending to “manage” the elder person’s household spending. In many cases these clients are referred to our firm by concerned relatives or third-parties who believe that the best interests of the elderly person has been exploited.
Have You or A Loved One Been The Victim Of Broker Theft?Investors who have been the victim of broker theft are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have been exploited by their supposed financial professionals. Brokerage firms are responsible for supervising the conduct of their brokers and can be held accountable when their agents engage in wrongdoing. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.