When Is It Appropriate to Sue a Stock Broker?

When you are investing in the stock market, dealing with a broker is usually inevitable. A stock broker is a regulated professional individual who is associated with a brokerage firm and is tasked with the duty of executing, buying, and selling orders on behalf of the client. In some instances, the acts of a stock broker, whether intentional or otherwise, can cause the client to lose money. For example, the broker can make miscalculated moves and lose a trade. In some cases, brokers engage in fraud, which leads to losses for the client.

What should you do if your broker causes you to lose money? Can you sue them? If so, when is it appropriate to sue a stock broker?

Stock market investors can sue their brokers for losses incurred under their watch. However, lawsuits aren’t always successful. Here are some of the situations in which it can be appropriate to sue your stock broker and get compensation for losses.

Evidence of Fraudulent Activity

If you have evidence that your broker has engaged in fraudulent activities that have led to losses on your part, you can sue for damages. Some of the common forms of fraud that may be performed by brokers in the stock market include the following:

  • Selling fake securities
  • Over-concentration of a portfolio
  • Making unsuitable purchases that are not in line with your requested level of risk
  • Trading without your consent
  • Breach of contract

In these cases of fraud, a breach of contract is usually the easiest to prove. In other instances, the broker and their firm will deny any allegations. Therefore, it may be paramount for you to engage a stock loss attorney so he or she can help you gather evidence and get legal redress.

Broker Negligence and Breach of Fiduciary Duty

When you hire a broker to trade on your behalf, they are expected to observe due care and uphold proper standards when handling your investment. Therefore, if you lose money due to the broker’s negligence or breach of fiduciary duty, you can sue them and get compensated for the stock loss. Some examples of negligence include:

  • Failure to execute your instructions pertaining to how and where to invest
  • Failing to put your interest first, hence breaching their fiduciary duty to you
  • Failure to conduct due diligence on which securities are suitable for your needs
  • Brokerage firms failing to supervise and monitor client accounts for suspicious activity
  • Supplying false or misleading information

Just as is the case with fraud, you have to prove that your broker was negligent or they breached their fiduciary duty to you, and as a result, you lost your investment. A good attorney can help you gather evidence, put together a case, and get compensated for the losses suffered due to the broker’s actions.

How to Seek Compensation

In most cases, brokers and their firms will deny any responsibility when approached with a liability claim. Therefore, be ready to seek legal counsel if you want compensation. Your lawyer will review the contract agreement to look for breaches, gather evidence, and build a strong case against your broker. Once you have a strong case, the chances of getting a ruling in your favor are drastically increased.

Final Thoughts

No one should lose stocks in the hands of a fraudulent or negligent broker. Therefore, if you are a victim of such a crime, sue your broker for damages so you can be compensated for the loss. Work with a stock loss lawyer so that they can help you research, gather evidence, and put together a tight case against the broker and their firm.

Mar 7, 2019 | Posted by in Blog | 0 comments

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