Types Of Securities Fraud All Investors Need To Know

Becoming a victim of securities fraud can cause a lot of stress and frustration. With the fluctuating markets and plummeting stocks, it may take a while for victims to realize that they are losing money not only because of the unpredictable markets, but also because of investment advisors and stockbrokers who have been fraudulent and negligent in handling investors’ assets. This could put victims in a bad financial situation, ultimately leading to great loss. If you suspect that you have become a victim of securities fraud, it is important to engage a securities litigation lawyer to help you with your case and to deal with your fraudulent stockbroker.

Common Types of Securities Fraud

There are many different types of securities frauds that investors can fall prey to. Here are some of the most common types of securities fraud:

  • Margin account abuse: This is an investment best suited for experienced investors. A broker-dealer will lend money to an investor. The investor will then proceed to buy stocks, thus allowing the firm to make commissions. Although the investor’s buying power may increase in doing so, the risk of investment losses also increases exponentially.
  • Churning: This occurs when a broker puts his own interest before the customer’s interest and makes excessive trades in an account to earn more commissions for himself.
  • Unsuitability: This is when a broker encourages an investor to invest in something that is unsuitable for their client and does not align with their needs, level of risk tolerance or their investment goals.
  • Overconcentration: Overconcentration occurs when a broker focuses too much on a certain type of security or investment with a customer’s portfolio. This means that the customer’s portfolio will lack diversification, and can potentially lead to great losses.
  • Failure to execute trades: Occurs when a broker does not carry out a trade ordered by the investor.
  • Unauthorized trading: Occurs when a broker does not seek the permission of their client and makes trades in an account.
  • Breach of fiduciary duty: When an investment adviser or a broker neglects the best interest of their customers and works to fulfil theirs instead.
  • Failure to supervise: Occurs when supervisors in a brokerage firm, or the firm itself fails to supervise their employees or brokers, leading to negligence and fraud.
  • Misrepresentation and omissions: When an advisor or a broker intentionally leaves out or misrepresents vital pieces of information about an investment, such as the risks. This may result in the client suffering losses after agreeing to invest in something they did not completely comprehend.
  • Breach of contract: Occurs when terms of a contract has been violated between the broker, the customer and the brokerage firm.

Weltz Law Can Help with Securities Fraud

Investors can file claims against their brokers and their brokerage firms on the grounds of securities fraud. Do you suspect that you are a victim of securities fraud? Here at Weltz Law, our team of attorneys are experienced and knowledgeable in the securities litigation field, and can help advise you on what you should do next. Securities fraud can lead to a lot of frustration and stress, and is important to solve as quickly as possible. Feel free to contact us for a free consultation regarding your case today.