What to do if You Suspect Stockbroker Misconduct

If a review of account statements or trade confirmations reveals questionable account activity, or if the client does not understand something in their account, the client should address any concerns immediately.

1. Contact the Broker and Branch Manager

Clients should discuss any concerns that they have with their broker. If the client is not satisfied with the broker’s response, clients should immediately address the issues with the branch manager. Any problems should be addressed as soon as the client identifies them, as significant delays in addressing problems can negatively affect a client’s potential claims against a broker and brokerage firm. Moreover, certain statutes of limitations can apply to claims, and investors could be prevented from bringing a legal claim if they fail to file a claim within the required period of time.

2. Market Losses Are Not Always the Cause of Investment Losses

Brokers and branch managers frequently represent to clients that investment losses are solely the result of “market losses.” But this is not always true. Stockbroker misconduct can cause account losses that are much greater than general market losses. Clients receiving such explanations should consider having their accounts reviewed by either another broker or by an attorney who has experience representing investors in stockbroker misconduct cases. This analysis will reveal whether the clients’ losses truly are the result of a general market decline.

For example, if a client wanted to be invested in a diversified stock portfolio, the client should request that the performance of their account be compared to the S&P 500 Index. If the client ’s account performed significantly worse than the S&P 500 Index, their investment losses might be the result of wrongdoing on the part of the broker rather than the consequence of “market losses.” If a client had a stated investment objective of income with a low risk tolerance, however, the S&P 500 Index would not be the appropriate benchmark against which the client’s account performance should be compared. That client likely should have been invested primarily in conservative bonds. As such, the client’s account performance properly should be compared to the performance of a conservative bond index.

3. Seek the Assistance of a Lawyer

When clients believe that they are stockbroker misconduct victims, they often are inclined to attempt to recover their investment losses from the brokerage firm on their own. This frequently is ineffective. Brokerage firms often claim that there was no wrongdoing. And in those instances where a firm offers money to resolve a dispute, the offer usually is far less than the client’s losses.

Investors also obtain little to no benefit from contacting the SEC, the NASD, or the NYSE. While these organizations are charged with policing the securities industry, they generally do not assist investors in the recovery of investment losses.

If an investor believes that they are a victim of stockbroker misconduct, they should seek the advice of a lawyer who has expertise in the area of securities arbitration and litigation. Most consultations of this nature are free, and such an attorney will possess the requisite knowledge to determine if the client has a valid claim to recover the investment losses.