Breach of Fiduciary Duty
Broker misconduct, or securities fraud, can cost a family hundreds of thousands of dollars in an instant. “Broker misconduct” is an umbrella term that refers to a range of ways a broker can betray the trust of his or her investors.
A broker should be a source of appropriate recommendations, transparent information, and honest advice. They are an investor’s connections to Wall Street, and should be recommending suitable investments to their clients and helping them create a diversified portfolio. The broker-investor relationship relies on the ability to trust the broker to provide suitable recommendations and treat their clients fairly. Brokers must act in the best interests of clients throughout the investment relationship.
The basic responsibility held by brokers is the duty of fair dealing. The duty of fair dealing is, in essence, a broker’s promise to disclose all facts relating to an investment, follow client instructions, ensure investments are suitable, and charge fair market rates. Investors trust brokers to steer them in the right direction regarding investments, and advise them candidly.
Brokers have many professional duties during the broker-client relationship, including (but not limited to):
- Making suitable recommendations.
- Making fair and balanced risk disclosures.
- Managing a client’s investment portfolio.
- Disclosing conflicts of interest.
- Researching financial markets.
- Monitoring clients’ investments.
- Reporting information to clients.
These firms push their brokers to recommend poor investments in order to increase their own profits at the expense of their clients.
Without truthful and complete disclosures, scheming brokers sell unsuitable investments and mislead their clients to their detriment. Securities fraud and misconduct run the gamut from simple acts of misrepresentation to large and complex ponzi schemes.
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