Investment Dispute Information

Today’s investor has access to a wide range of investment vehicles to help them meet their financial goals. From stocks, bonds, and cryptocurrency to mutual funds, hedge funds, and variable annuities, the types of investments available to a modern retail investor can be almost overwhelming. While they can choose to invest on their own, using apps such as E*TRADE and Robinhood, this typically limits their options. For that reason, many investors turn to third parties such as broker-dealers and investment advisory firms. 

Investing is not without risk, and many investors lose money solely because of normal market fluctuations. However, both the companies that issue investments and the third parties (i.e. advisers and brokers) that facilitate trades must play by the rules. When they do not, and investment losses occur, investors may be able to take legal action to recoup their losses.

Types of Investment Disputes

Investment disputes generally fall into two categories: 

  • Disputes arising out of the conduct of a securities issuer; and
  • Disputes arising out of the conduct of an investment broker or adviser

Securities Issuer Disputes

Private companies issue publicly-traded securities such as stocks and bonds as a way to finance the business. Generally, the price of these investments fluctuates based on the company’s performance. For example, a strong quarterly earnings report might drive higher demand for a company’s stock, leading to higher prices. There are strict federal laws about the types of business and financial data that publicly-owned companies must disclose. When a company fails to disclose information, such as insider trading or overstatement of income, stock prices are distorted. And when this information later comes to light, it can cause a crash in price that hurts investors.

The most famous example of this involved the energy-trading company Enron. Enron, which used accounting tricks to keep certain transactions off its books, turned out to be a Ponzi scheme that resulted in investor losses estimated at $74 billion. Thousands of investors filed a class-action lawsuit that resulted in a $7.2 billion settlement.

Securities fraud of this type is often prosecuted as a class-action lawsuit since many investors are similarly affected. Other types of cases may be better suited to individual litigation. Recently, there’s been a rise in scams around cryptocurrencies, including tokens. Although major coins like Bitcoin and Ethereum are not securities, the SEC considers initial coin offerings (ICOs) to be securities offerings.

Did you lose money on an investment due to possible fraud or a scam? Contact Morgan & Morgan’s investment dispute lawyers to learn your options.

Broker and Adviser Misconduct

Securities are regulated not only on a company level but also on the adviser level. The investment professionals who make transactions on behalf of investors owe their clients a fiduciary duty that requires them to act in their client’s best interests. When they ignore this duty, investors often pay the price.

Financial adviser misconduct is widespread and costs investors hundreds of millions of dollars per year. Some of the most common types of adviser misconduct include:

  • Unsuitable investments, or selling investments that do not match the investor’s profile
  • Excessive trading, or “churning” a client’s account to generate broker commissions
  • Selling away by selling securities that are not offered by the brokerage firm
  • Unauthorized trading activity that is executed without the client’s permission
  • Overconcentration of a portfolio through a lack of investment diversity
  • Misrepresentation or omission of material facts about an investment (either intentional or unintentional)
  • Failure to supervise the activity of a firm’s brokers

In most cases, when you hire a professional investment adviser or securities firm, the contract contains language that requires you to resolve disputes using Financial Industry Regulatory Authority (FINRA) arbitration. FINRA arbitration purports to be a neutral forum for claims resolution, but arbitrators may have conflicts-of-interest that preclude true neutrality. You have the right to hire an attorney for a FINRA proceeding. Without an attorney, you will be taking on powerful financial interests alone.

Contingency-Fee Investment Dispute Lawyers

Morgan & Morgan’s investment dispute lawyers have helped investors recover millions of dollars in investment lawsuits and FINRA arbitrations. We work on a contingency-fee-basis, so you do not risk losing even more money. If we don’t recover your losses, you pay no legal fees.

To learn about your rights as an investor and how we can help you recover investment losses, please get in touch for a free consultation.

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