Brokerage Firm Liability

Proving Brokerage Firm Liability for Investor Losses

Section 15(b)(4)(E) of the Securities Exchange Act requires broker-dealers to reasonably supervise employees (and associated persons) in order to prevent violations of securities laws. Section 20(a) holds that those who directly or indirectly control someone who sells securities in violation of the Act could be held liable to the same extent as the seller.

Brokerage firm liability is based on the fact that the firm and its supervisors have some means of control, discipline or influence over their own brokers. Therefore, in most securities arbitration cases, a brokerage firm can be held financially responsible for investor losses caused by the negligence, fraud or misconduct of its stockbrokers. In some situations, the brokerage firm may be found independently liable for its own failure to train and supervise its brokers.

Does your broker's employer know what has been done to your portfolio?

Examples of instances in which a brokerage firm could be held responsible for investment losses of stockholders because of brokerage firm misconduct include:

• Negligent hiring of brokers
• Negligent supervision of brokers
• Tolerance of unlawful, unsound or unauthorized trading practices
• Inadequate internal investigation of allegations of stock fraud, churning, or other misconduct by its brokers
• Failure to implement effective remedial measures once wrongdoing has been discovered

Recovering investor losses

At the law office of Dimond Kaplan & Rothstein, P.A. (DKR), our securities fraud attorneys can investigate stockbroker misconduct claims for signs that the brokerage firm has a share of the liability for investor losses. When investors lose money, we scrutinize the steps taken by the brokerage firm to protect its clients from the negligent or fraudulent conduct of its brokers.

For a free initial consultation about recovery for your investment losses against a brokerage firm, contact an attorney experienced in stockbroker liability at a DKR office in Miami or West Palm Beach. We represent investors in Florida and nationwide in claims to recoup investment losses due to stockbroker misconduct and securities fraud. Call 888.578.6255 to discuss your claim.