Investment Broker Fraud Attorney

Frequently Asked Questions About Stock Fraud and Investment Broker Fraud

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Q. What is stock or investment broker fraud?

A: It occurs when a investment broker manipulates customers into trading stocks without considering the customer's best interests. Investment broker fraud can be committed by a single employee or it can be orchestrated at the company level. These transactions range in size financially from multi million dollar deals to penny stocks.

Q. How do the investment brokers perpetuate investment broker fraud?

A: There are a few basic categories each being susceptible to enormous variations. Here are a few examples:

· Misrepresentation/Omission: occurs when the investment broker intentionally misleads the customer about material facts regarding the stock. Risk factors associated with the particular stock are often disguised.

· Unsuitability: occurs when the investment broker recommends stocks that are outside the client's risk tolerance. Unsuitable matches allow the investment broker to push undesirable stocks and frequently result in much higher losses than the client can bear.

· Overconcentration: failure to diversify a client's portfolio can be a form of stock fraud. Investment broker fraud through overconcentration strips the client of the protection diversification can afford.

· Churning: creates additional broker's fees. It requires a large number of transaction often consisting of selling stocks with small gains in order to show a profit.

Q. What is a predispute arbitration clause?

A: Virtually every securities brokerage firm will provide you with a standard new account form with a clause that requires you to pursue any grievance through arbitration proceedings instead of the court system.

Q. How does arbitration work?

A: Arbitration is just like a trial except instead of a judge and jury you get a panel of one to three arbitrators, which act as both judge and jury. They hear and weigh the arguments and evidence of both sides of a case, then render a binding decision. The arbitrators generally include at least one "industry" person and two non-industry people. This may include accountants, attorneys, sales representatives, bankers, educators, retired judges and other professionals. Unlike court proceedings, arbitration usually doesn't involve depositions, motions, or appeals. It's usually much faster and cheaper than civil court. The average length of time is 12 months from filing to first hearing versus more than two years in state or federal court.

Q. Who conducts the arbitration proceedings?

A: The three main forums for resolving securities arbitration disputes are:

· The American Arbitration Association

· The New York Stock Exchange

· The National Association of Securities Dealers, Inc.

Q: Where is the arbitration proceeding held?

A: At different places around the country.

Q: How much will it cost to file a Statement of Claim in an arbitration proceeding?

A: Each forum charges its own filing, administrative and hearing fees. The average filing fee with the NASD is approximately $1200. The greater the amount of your claim, the greater your filing and administrative fees will be. If the case reaches a settlement, a portion of this fee may be returned.

Q: Can I work it out with the brokerage without involving investment broker fraud attorneys?

A: You can try, but investors who have qualified legal representation consistently do better in arbitration proceedings. If you are going to hire an investment broker fraud attorney, do so as soon as possible. DO NOT talk to the brokerage except through an investment broker fraud attorney. This includes e-mails. Talking to the brokerage is one of the biggest mistakes investors make.

Q: I live outside the United States. Do I file in my country or where the brokerage is located?

A: Because of NASD Rules governing the jurisdiction of brokerage firms, international clients with brokerage accounts with a NASD registered firm must file arbitration cases in the United States.

Q: What are my odds of "winning" a case?

A: According to the Securities Arbitration Commentator, a periodical publication that has studied the statistics of securities arbitration lawsuits and cases, 80% of all customer cases settle in favor of the investor prior to the rendering of an arbitration award. Over half of the remaining 20% that do not settle prior to arbitration result in an award to the customer.

 

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If you or a loved one has been harmed by stock broker or investment fraud, please call or email our experienced investment broker fraud attorneys today. We'll evaluate your claim for free and help you get the justice you deserve.