Zamansky LLC is a leading securities fraud law firm located in the heart of Wall Street.

Understanding Stock Brokers’ Obligations to Their Clients

Posted: Apr 21, 2015 | Posted in:

When you hire a stock broker, you expect them to act with your best interests in mind. Yet, while most people would expect this obligation – and a general sense of morality – to be enough to prevent stock broker misconduct, sadly, this is not always the case.

While investors cannot prevent stock broker fraud from leading to market losses, knowing your broker’s duties can help you make informed decisions and spot issues when they arise.

Keeping Your Best Interests Front and Center

As a private investor, you are entitled to rely on your broker to provide advice and recommendations that serve your investment objectives. This means your broker should put your interests before his or her own and must never make investments on your behalf for any reason other than to help you achieve a favorable return.

If you suffer losses and it turns out they could have been avoided had your stock broker not breached this duty to put your interests first, you may be entitled to compensation. An experienced lawyer who focuses on securities fraud and arbitration will be able help you file a claim against your broker.

The following are common indicators that a broker is not acting with your best interests in mind:

  • Investments that do not align with your investment goals
  • Investments that are out of proportion to your financial situation
  • Trades that are made without your explicit authorization

We generally refer to trades that meet these descriptions as lacking “suitability.” When your broker makes unsuitable investments and those investments result in losses to your portfolio, your broker can – and should – be held financially responsible.

Your Broker’s Duty of Competence

Simply put, brokers should not be providing investment advice if they are not qualified to do so. Your hard-earned money is at stake – maybe even your entire nest egg – and it needs to be treated with care. Many investment vehicles are novel and extremely complicated. If your broker does not have a firm grasp of the complexities involved in an investment, how can they possibly provide an informed recommendation?

Of course, brokers are not expected to be right 100 percent of the time. No one can predict the stock market with certainty; and, when relying on judgment, things do not always go as planned. However, there is a huge difference between a good-faith judgment call and a deliberate decision not to adhere to a client’s investment strategy and risk profile. The former is a hazard of the profession. The latter is a hazard to the public that justifies your broker being taken to task.

Speak with an Experienced Stock Market Loss Lawyer at Zamansky LLC

If you are questioning your broker’s decisions and believe that improper motives may be involved, contact Zamansky LLC to speak with one of our lawyers today.