Investment loss cases generally involve individuals who have lost money as the result of getting bad advice from their broker or investment advisor. These losses can occur in a pension fund, 401k, personal investment account or other financial account.
If money is invested properly on your behalf, large stock market losses should only occur in rare circumstances. However, at times, your investment advisor or stock broker will give you bad advice or put you into an investment that is unsuitable for your particular situation. For example, an elderly retired individual should not be told by a broker to put your retirement money into aggressive investments where you could lose a majority of your money. Further, an advisor should not put you into investments such as annuities without fully explaining the costs associated with these investments along with the possibilities of losing your principal.
Churning occurs when a broker trades excessively in order to boost the commission. Churning is illegal and can cause clients to lose money. By putting their own interests ahead of their clients, brokers guilty of churning may engage in poorly timed or badly researched trades. Clients are also forced to pay extra fees and pay higher taxes.
Conflicts of interest in securities firms have been a source of many recent fines and lawsuits. Most securities firms house both investment banking and stock analysis businesses, setting up a potential conflict of interest. When a firm provides stock analysis for its own investment banking clients or for companies whose business it hopes to secure, the potential for bias is great. Analysts may feel pressure to rate such stocks highly, even if they are not expected to perform well. Misleading stock reports created because of conflicts of interest can hurt investors. Investors may lose large sums of money because of the deceptive information they receive.
Professionals in many fields are expected to provide their services according to a certain standard. Negligence and malpractice occurs when a broker provides investors with grossly inaccurate, deceptive, unfounded, or misleading information. Whether from ineptitude, self-interest, or intent, such mistakes can cause investors to lose money. In some cases, the brokerage firm employing the broker may be responsible for failing to supervise.
Risk is inherent in all investments, but some stocks have greater potential for losses than others. In general, the term “risky investments” refers to stock that may yield high returns, but that also has a higher possibility large losses. Examples of risky investments include buying on margin and investing in start-ups. Because of the possibility for significant losses, brokers have the responsibility to explain the dangers involved in risky investments, only allowing investors to proceed if they are able to cope with the worst-case scenario.
You may be able to recover some or all of your investment losses through an arbitration process. Arbitrations provide investors with an opportunity to recover their losses through a less formal process than a jury trial. If you or someone you know has suffered losses in the stock market, we can assist you in evaluating your case.