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more_legal_areas stock_fraudIn recent years, it seems that more and more cases of stockbroker fraud are coming to light, creating an unprecedented awareness among consumers of the potential damages resulting from stockbroker fraud. The relationship between an investor and their stockbroker depends upon the investor trusting that the stockbroker will make decisions that are in the best financial interest of the investor-stockbroker fraud violates that trust in favor of personal greed.
Most forms of stockbroker fraud are variations on the following methods:
• Churning: When a stockbroker engages in excessive trading for a client, he may be committing a type of stockbroker fraud known as "churning". Broker''s fees are generally charged per transaction-so a broker may conduct a large number of transactions to generate commissions. One sign of this sort of stockbroker fraud is if the broker continuously sells winners at a small profit and keeps the losers. To prove that stockbroker fraud is taking place, you must establish that the pattern of trading on that account was excessive.
• Unsuitability: Another approach of stockbroker fraud is to recommend investments that are inconsistent with the client''s ability to tolerate risk. The broker may make such recommendations because he or she stands to benefit through kickbacks or commissions from the company whose stock they sell to unsuited clients. Unsuitable recommendations may not always be due to stockbroker fraud; in some cases the broker is merely incompetent (but can still be held liable for client losses).
• Misrepresentation/Omissions: A broker may be accused of stockbroker fraud if that broker misrepresents or omits important information about an investment, and the client loses money as a result.
You don''t have to be a multi-millionaire or own a portfolio full of blue-chip stocks to become the target of stockbroker fraud, in fact many of the more successful scams rely on penny stocks or a large number of low-profile clients. The fact is, anyone can become the victim of stockbroker fraud, and often companies and individuals can be adversely affected, even if they were not involved in a stockbroker fraud directly.
If you believe that you or a loved one has become the victim of a stockbroker fraud, you should contact an attorney who is familiar with the laws governing stockbroker fraud. There are very specific ways in which victims must gather information and file charges of stockbroker fraud, and an attorney who has experience in this specialized field will be able to help you make the best legal decisions.
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