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Silver Law Group Files FINRA Arbitration Claim Alleging Excessive use of Margin, High Commissions and Elder Financial Fraud on behalf of an Unsophisticated Retiree

Silver Law Group, a law firm specializing in securities and investment fraud, has filed a securities arbitration claim with FINRA on behalf of an elderly investor alleging stockbroker misconduct and the unsuitable use of margin and excessive trading.

FINRA recently issued investor guidance highlighting “Purchasing on Margin, Risks Involved with Trading in a Margin Account.”  FINRA describes the risks including the following:

  • You can lose more funds than you deposit in the margin account;
  • The firm can force the sale of securities in your account;
  • The firm can sell your securities without contacting you;
  • You are not entitled to an extension of time on a margin call; and
  • Open short-sale positions could cost you.

However, most investors don’t appreciate that margin lending is a major profit center for Wall Street incentivizing many stockbrokers to recommend margin to its clients without disclosing all of the risks.  Many brokerage firms are able to earn multiple revenue streams by promoting the unsuitable use of leverage by earning interest on the loan and fees, commissions and markups on investment products.

At the end of 2017, margin debt stood at an all-time high of almost 700 billion dollars! Scott Silver of Silver Law Group comments, “We have received many phone calls from investors who have lost a substantial amount of their life savings because a financial advisor recommended taking a margin loan, line of credit (LOC) or other credit line promising an investor that he could make a greater return on investment above any interest rate in the current low interest rate environment.”  Unfortunately, borrowing money to invest is speculative and frequently a recipe for disaster.  FINRA recently highlighted in its annual regulatory and examination priorities letter that it intends to focus on firm’s compliance with sales practice and operational obligations in regards to margin loans and securities backed lines of credit because many investors are unaware of the risk in this strategy.  Wall Street has also sold many investments to seniors and others promoting the investment as paying a high dividend or yield without explaining that the investment is leveraged and can lose substantial value.

Call an Investment Fraud Attorney Today

If you suffered losses tied to the unsuitable use of margin or because of excessive fees, costs or markups, you may be able to recover losses through FINRA arbitration. Please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345 to speak to an attorney to find out how we may be able to help you recover some of your investment losses.

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