This page is for those who may not be ready yet to speak with an investment fraud attorney about their situation. It is our goal to try to anticipate some of the questions you may have from our experience interviewing clients who have suffered investments losses. Hopefully, after reading this section you will have a better understanding of some your potential legal options. Our attorneys are here when you are ready to discuss your case.
Investors understand that investing often involves risk. However, many investors do not realize that sometimes losses occur as the direct result of their advisor’s negligence, misconduct, and in some extreme cases fraudulent behavior by their broker or those who run the investments recommended.
Investors also underestimate just how common brokerage firm negligence and fraud is in the financial industry.
In just the year 2019 alone 348 advisors or brokers were barred from the brokerage industry by one financial regulator – FINRA. In addition, another 415 brokers or advisors were suspended for their misconduct. In total, nearly 3,000 investor complaints were received by FINRA.
Part of the reason that investors are often caught off guard by their advisors misconduct is due to the successful marketing job the financial industry does through commercials and print ads that openly solicit investor trust and confidence. Another reason is that often times the reason for the advisors negligence is hidden from the investor who does not understand the behind the scenes actions of the firm that caused their losses.
If you even suspect advisor misconduct it is worth considering talking to an attorney who handles investment fraud related disputes. Investors do have rights and remedies in cases where losses occur due to the negligent or fraudulent actions of their broker, advisor, and the investment firms they work for.
If you are considering speaking with an attorney who focuses on investment fraud about recovering your losses you should know a few things about the attorneys at Gana Weinstein LLP:
Our securities fraud attorneys below answer some of the most frequently asked questions from investment victims.
While it is true that there are regulations and regulators that enforce the securities laws investors need to be vigilant in vetting their advisors. The securities regulations that exist include federal laws, the SEC, state regulators, and FINRA among other regulatory agencies.
However, most investors do not realize that the primary regulator and overseer of their advisors are the investment firms themselves. Firms are required to supervise their agents and are charged under the securities laws to detect and prevent fraud and misconduct by their agents. Unfortunately, studies now show that certain brokerage firms actually cater to the misconduct of their advisors and do not properly supervise their activities. In fact, brokerage firms often argue in our cases that they have no obligation to stop the frauds of their agents.
Due to the failures of self-regulation and the inability of regulators to devote sufficient resources to prevent adivisor misconduct investors should always check the credentials and work history of any advisor they deal with.
For example, FINRA’s BrokerCheck displays complaints and disciplinary actions filed against brokers or firms. This resource also lists when the broker or firm is no longer registered and may state why that person is no longer a member of the industry. On the advisory side, the SEC Investment Advisor Public Disclosure IAPD compiles the background information on advisors and advisory firms. Another resource is the North American Securities Administrators Association (NASAA). This organization is a consortium of state regulators who combine their resources to jointly regulate and protect investors. The organization has helpful links and resources for investors.
While investing does entail risks a financial professional should only make investments that expose an investor to reasonable risks that are consistent with their financial plan and stage of life. When an investor suffers an unusual (or unexpected) loss that is inconsistent with either the investor’s expectations or how the investment strategy was described an investigation and explanation is warranted.
Overall, investing should result in positive results over medium to long term time horizons. For example, Vanguard provides sample model portfolios and expected returns. A portfolio with 60% stocks and 40% bonds over the last 90 plus years averaged 8.6% returns and only suffered losses in 22 out of 93 years. Accordingly, a portfolio that generates no returns over 10 years for example is highly unusual under most market conditions.
If you have suffered losses year after year while the market is generally performing well you have the right to ask why your portfolio cannot perform even under good or positive economic conditions. The answer may or may not be negligence on the behalf of the advisor but unusual account performance is a potential warning sign that there could be a deeper issue with your investment portfolio.
In the sections below, we outline some of the common claims that our firm brings that may also explain reasons for your unexpected investment performance and investment losses.
There are also deceitful advisors, even registered ones, out there in the industry at every moment who work hard to disarm their clients concerns and suspicions for their own ends. While there is no full-proof way to prevent fraud there are steps that can eliminate many of the more common fraudulent practices.
First, as stated earlier use BrokerCheck and other resources to check your advisor’s credentials. If your advisor has committed fraud in the past there is a chance such information will be listed here.
Second, many clients are defrauded through overly complex and opaque investments and investment strategies. Since fraud flourishes in the shadows advisors that engage in fraud are not known for their transparency. If the investments or investment strategy are difficult to understand it may be misrepresented to you. If you do not receive regular account statements or receipt information concerning your transactions it could be a warning sign of fraud. If the investment does not come with disclosure documentation it could be a warning sign of fraud. If the investment never changes value over many years and there is no news, audits, or updates as to the performance of the investment this could be a warning sign of fraud. In sum, the easier the investment is to understand and the greater the transparency the less likely that either the advisor or the investment is an outright scam.
In the event that you are the victim of investment fraud, keep as many detailed records as you can concerning the activity including all contacts with your broker, financial transactions, reports, emails, and other information. These details are important when analyzing your avenues and options for loss recovery.
There are many reasons that victims of investment fraud do not seek recovery options when they have suffered losses.
The two top reasons are that they are embarrassed that they were taken advantage of and refusal to believe that they are a victim of fraud. Many investors view their fraud losses as a personal failing and blame themselves for either not trusting their “gut” in their dealings or not digging deeper first before agreeing to invest. Our firm often takes calls from investors where it is apparent that the person is having a difficult time conveying what has happened to them due to their feelings of embarrassment and failure. Sadly, if an investor has sufficient other resources to adjust their lifestyle to accommodate the loss the investor may not contact an attorney at all to avoid the topic.
The second reason is that many investors are either tricked or refuse to believe that they were the victim of fraud or wrongdoing. These investors either believe that if they wait long enough the deal will be successful or otherwise cannot confront the fact they have suffered losses because it is too painful a subject for them. These reasons keep victims of investment fraud from exploring their recovery options.
There are also a host of other reasons that some investors do not reach out for help including that the investment was too complicated for the investor to understand their losses, the investment losses are concealed by the broker or the brokerage firm through convoluted account statements, and that advisors who have engaged in wrongdoing routinely discourage investors from seeking legal help or filing complaints.
Whichever category you fall into you owe it to yourself to at least understand what the options are and what can be done to recover losses. Whether you choose to move forward with a claim is a personal decision that only you can answer but our firm is here to make sure you have all the information necessary to make the decision that fits your circumstances.
Advisors use several tried and true methods to discourage upset investors and victims of investment fraud from seeking legal help. First, the advisor will invariably play on their personal or financial relationship with the investor to downplay or smooth over the events. Many advisors enjoy a personal relationship with their clients with some even being invited over to their client’s homes or for family events. Other advisors are part of the same social circles and communities that cause investors to reconsider disrupting their social circle or community.
Another common tactic is that the advisor will simply try to delay action by the investor. When the investor asks the broker for an update on the investment or strategy or why the value of their accounts has drastically declined response is typically that the losses are only “temporary”, “it’s just the market”, “there’s a short-term issue”, and of course “it will come back” and always “don’t worry.”
A warning sign of securities fraud would be if the advisor gave these answers but could not go into more detail as to what the specific cause of the decline or loss was. Sometimes these claims may be true if the broader market or industry has declined, but in cases of investment fraud there will be a lack of transparency as to the reason for the decline and what the expectation for the investment is.
Investors should seek out investment attorneys if they are concerned that their advisor is discouraging them from seeking other advice. At the very least, a consultation concerning the investment or investment strategy would provide an investor with additional information for them to consider. There have been occasions where our attorneys spot problematic conduct or securities on calls where investors are just seeking information concerning a confusing investment recommendation or transaction in their account.
Investment fraud and negligence can be difficult to spot for even intelligent investors. Many of our clients are doctors, engineers, and lawyers in other fields of practice. Advisors defraud the less educated and highly educated alike. The most common ways investment losses are concealed from investors include:
Depending upon whether you are dealing with a broker or financial advisor the duties are slightly different. However, every advisor has duties commonly included and considered part of a fiduciary duty. These duties include duties or prudence in recommendation and advice (called the duty to recommend suitable investments), the duty to disclose most conflicts of interest, duty to disclose material information, and the duty to act in the best interests of the client. A registered investment advisor has additional duties of ongoing duty of care in the handling of the investment accounts. Investment advisors may also be granted discretionary authority – like a power of attorney – to trade your account without prior discussion and there are additional duties related to this arrangement.
These duties are laid out in numerous industry rules and notices explaining the implementation of the rules. In addition, one of the most important duty owed to investors is the firm’s duty to supervise the activity of their brokers and advisors. Brokerage firms are mandated to implement reasonable supervision and are required to have written procedures, test those procedures, and even certify annually that they have supervisory procedures that are reasonably designed to detect and prevent violations of the securities laws by the firm and its agents. The supervisory rules allow brokerage firms to be liable even when their advisors hide or otherwise attempt to circumvent rules designed to prevent fraudulent securities activity. The duty to supervise is one of the most critical investor protections that exist.
Our firm handles many types of violative conduct between advisors and their clients. The common element to all claims is that the client entrusts funds to the advisor who then abuses that trust in some way leading to an investment loss. How that loss occurs takes many patterns and continues to evolve with the brokerage industry and new technology.
The other pages on this website contain more information concerning the specific types of claims and cases our firm handles but a brief description of some of the more of the more common types of claims are:
A financial advisor can abuse any type of security or financial product and harm their clients. However, there are certain types of investment products that are more commonly abused then others and investment strategies that are far more risky than the average investor is willing to accept. In our practice many of the most egregious violations occur where the financial products recommended are either overly complex, illiquid, opaque, or private.
The other pages on this website contain more information concerning the specific types of claims and cases our firm handles but a brief description of some of the more of the more common types of claims are:
Our firm’s attorneys know how to evaluate potential investment fraud claims. If you have suffered serious investment losses you should contact an investment fraud attorney to determine if there are viable avenues for recovery.
Our attorneys may take different steps to review and investigate the conduct at issue for your individual case. Some of the information that is commonly sought by our attorneys in reviewing your potential claims are:
With this information our attorneys will be able make some preliminary determinations as to if and how a case could proceed and what types of claims and damages could be sought.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.