Securities Fraud Lawyers

Broker-dealers and Registered Investment Advisors have a responsibility to adequately supervise all representatives who are registered through their firm, in addition to the accounts and investments managed by the firm.  These firms must also take steps to ensure that their financial advisors follow all securities rules and regulations, as well as internal firm policies.  When Broker-dealers and Registered Investment Advisors fail to adequately supervise their registered representatives, they can be liable for investment losses sustained by their customers.  

If you are a victim of securities or investment fraud, contact the experienced lawyers at Israels & Neuman, PLC, today for a free consultation.  We proudly represent investors in securities arbitration cases in all 50 states.

FINRA Arbitration

The Financial Industry Regulatory Authority (FINRA) is a non-governmental organization that oversees securities brokerage firms and their registered representatives. It ensures fair practices, transparency, and compliance with federal securities laws.  FINRA provides a dispute resolution process known as arbitration.  FINRA Arbitration is a dispute resolution process between investors and brokerage firms, offering a faster, less formal, and cost-effective alternative to court. Key steps include filing a claim, selecting arbitrators, presenting evidence in a hearing, and receiving a binding decision.

Investors and broker-dealers are required to arbitrate disputes between them in FINRA Arbitration because it is mandated by the FINRA Rules and by arbitration agreements that investors are required to sign when accounts are opened.  If you need to file a FINRA arbitration claim, it is important to hire a securities fraud lawyer that has experience in the forum and can advise you regarding your rights as an investor.

Unsuitable Investment Recommendations and Violations of Reg BI

Under FINRA rules, financial advisors must recommend investments that align with an investor’s profile, balancing risk with their financial situation and objectives. Factors considered include age, financial capacity, investment goals, liquidity, future earnings, experience, and risk tolerance.  Examples of unsuitable investment recommendations could be high-risk stocks for conservative investors, long-term investments for those needing short-term liquidity, overconcentration in a single sector, or ignoring personal circumstances like age or financial changes.  Unsuitable investment recommendations can have devastating results on a client portfolio.  When advisors make unsuitable investment recommendations and they lead to investment losses, investors may be able to file a claim for their losses against their financial advisor and his or her advisory firm or brokerage firm.

Investors are also afforded additional protections by Reg BI Implemented by the SEC in 2020, Reg BI enhances investor protection by requiring broker-dealers to prioritize clients’ best interests over their own financial gain.  New obligations imposed by Reg BI include the Best Interest Obligation, the Disclosure Obligation and the Duty of Care Obligation.  If newly defined obligations imposed by Reg BI are not complied with, investors may have legal recourse against their financial professionals.

Advisor Theft, Selling Away and Ponzi Schemes

Sadly, sometimes financial advisors steal their client’s money.  The money can be stolen directly from their accounts, but more often, is stolen in connection with a PONZI scheme or a selling away scheme.

A Ponzi scheme is an investment scam where returns to earlier investors come from new investors’ funds, not actual profits.  Such schemes collapse when new investments dry up, leaving victims with substantial losses.  Many Ponzi schemes involve financial advisors or stockbrokers, making their brokerage firms potentially liable under FINRA regulations.

Selling away occurs when financial advisors sell unauthorized or unapproved investments, often leading to fraud or Ponzi schemes.  Risks include lack of oversight, conflicts of interest, undisclosed risks, and limited recourse for investors.  FINRA and SEC regulations require firms to supervise advisors and prevent unauthorized sales like these.  Brokerage firms may still be liable for investor losses due to selling away or Ponzi schemes under FINRA Rules 3110 and 3270.

If your funds have been stolen or you are involved in an investment that seems suspicious, it is important to contact a law firm with experience with PONZI schemes, theft and selling away.  Brokerage firms and advisory firms generally deny liability for these types of activities, but they can absolutely be held liability for them.  An attorney with experience with financial theft and securities fraud will have in depth knowledge of how to get your case ready for trial and get you the most amount of money possible.

Financial Advisor Negligence and Fraud

Can you take legal action against your broker or financial advisor for negligence or fraud in investment sales?  Yes, you may pursue legal action against your broker, brokerage firm, or financial advisor through the FINRA arbitration process—and in some cases, in court—to recover damages resulting from negligence, fraud, misrepresentation, or omissions in investment sales.

Financial advisor fraud can take many forms, each potentially leading to significant financial losses for investors. One common type is misrepresentation or false promises, where advisors provide misleading information about investment opportunities, exaggerate potential returns, or downplay risks to persuade clients to make decisions that are not in their best interests. Similarly, unauthorized trading occurs when an advisor executes trades or makes investment decisions without the client’s consent or knowledge. More severe cases include Ponzi schemes or embezzlement, where client funds are misused for personal gain or to pay returns to earlier investors instead of being invested as promised. Another deceptive practice is the failure to disclose conflicts of interest, where advisors recommend investments that benefit them—such as those offering higher commissions—without informing the client. Additionally, investors may fall victim to excessive or hidden fees, which diminish returns through undisclosed or unusually high charges. Some advisors engage in forgery or account manipulation, altering documents, forging signatures, or tampering with account information to conceal losses or make unauthorized withdrawals. A particularly damaging practice is churning, where an advisor makes frequent trades primarily to generate commissions or fees rather than serving the client’s investment needs. Victims of financial advisor fraud often experience substantial financial harm, especially those nearing or in retirement. However, legal action, such as suing for breach of fiduciary duty or fraud, may help investors recover their lost funds.

Investors in the United States are safeguarded by various state securities laws that prohibit fraudulent practices in the sale of securities. When a financial advisor violates these laws, they may face significant legal, regulatory, and financial repercussions. Known as “Blue Sky Laws,” these regulations are designed to protect investors from fraud, negligence, and other misconduct. Penalties for violations vary based on severity and can include both civil and criminal sanctions.

If you suspect you’ve been a victim of fraud, it’s crucial to retain all documents related to your potential claim and contact the experienced lawyers at Israels & Neuman, PLC as soon as possible to discuss your legal rights as an investor.

Financial Advisor Breach of Fiduciary Duty

Can You Sue a Financial Advisor for Breach of Fiduciary Duty?  Yes, investors can sue their broker or financial advisor for breaching their fiduciary duty, which is a legal obligation requiring advisors to act in their clients’ best interests.  Fiduciary duties are imposed by the Investment Advisors Act of 1940 and various state Securities Acts.  A fiduciary duty includes loyalty, care, and good faith, meaning advisors must prioritize their clients’ interests, manage assets prudently, and disclose relevant information transparently.

Common breaches of fiduciary duty include self-dealing, excessive fees/hidden charges, failure to diversify, misrepresentation/omission, churning and failure to timely process or adhere to instructions.  Clients can sue for financial losses and, in some cases, punitive damages. Many agreements require disputes to be settled through arbitration rather than court.  Some transactions may be reversed to restore clients to their pre-contract state.  If you have been injured by your financial professional, contact the experienced investment fraud lawyers at Israels & Neuman, PLC to help you maximize your recovery.

Failure to Supervise Brokers and Investment Advisors

A brokerage firm’s duty to supervise refers to its legal responsibility to oversee employees’ activities to ensure compliance with laws, regulations, and ethical standards. This duty is mandated by regulatory bodies such as FINRA, the SEC, and state securities regulators to protect investors.

Brokerage firms, known as broker-dealers, must establish written supervisory procedures covering all aspects of their business.  They must also supervise their brokers and employees, accounts and securities transactions, and provide training to their employees.  All branch offices must be supervised, and accounts must be monitored to ensure that investments are in fact suitable for the investor.   Failure to supervise can result in liability for customer losses, legal penalties, and damages.

Similar to brokerage firms, Registered Investment Advisory (RIA) firms must supervise employees to ensure compliance with securities laws and fiduciary responsibilities. RIAs operate under a fiduciary standard, meaning they must act in their clients’ best interests and their supervisory system must reflect that.

A firm’s failure to supervise can lead to liability for investment losses. Investors who suffer investment losses due to inadequate supervision may seek legal recourse.  Israels & Neuman are experienced lawyers who have handled many securities fraud cases related to supervision and can quickly evaluate failed supervision claims.

Aggrieved investors should consult a securities investment fraud attorney that services aggrieved investors in Seattle, Phoenix, Chicago, Grand Rapids and Ann Arbor

Whether you are concerned about securities fraud, negligence, or breaches of fiduciary duty, Israels & Neuman, PLC can help guide you.

It is critical to have an experienced investment fraud attorney at Israels & Neuman, PLC on your side. Often, brokerage firms spend a great deal of money on their legal defense, and it is advisable to hire an experienced and knowledgeable securities attorney such as Aaron Israels and Dave Neuman to go up against them. We have recovered millions of dollars for our clients.

Our arbitration fees are based on a contingency fee, meaning you do not pay us unless we recover money for you. Call us at (616) 280-4303 or email us at aaron@israelsneuman.com or dave@israelsneuman.com.