Misrepresentation or Omission of Material Facts
The misrepresentation and omission of material facts concerning investment recommendations by a brokerage firm and its representatives constitute two types of controversies that a FINRA arbitration claim for damages may resolve.
FINRA lists both misrepresentation and omission of facts as two of the top 15 controversy types in customer arbitration claims.
Misrepresentations and omissions usually fall into two categories; those that are Fraudulent and those that are Negligent.Investment Fraud
A securities fraud claim requires intent, on the part of the financial advisor (or other), to misrepresent or omit material information to an investor concerning an investment recommendation. Sometimes the persons making the recommendation to invest are not even actual registered financial advisors at all. Fraudsters come in all types and may present themselves as legitimate investment professionals.
An investor who reasonably relies upon the misrepresentation and as a result of the reliance suffers investment losses or in the event of an omission or non-disclosure of a material fact, the investor proves that there was a duty to disclose the material facts at issue, may be able to recover damages.
Investors should make sure that any person recommending or selling an investment opportunity to them is licensed and registered with the SEC and/or FINRA. Investors should check the person’s profile at the SEC’s Investment Adviser Public Disclosure (IAPD) website and the Financial Industry Regulatory Authority (FINRA)’s BrokerCheck tool to see if the broker or financial adviser is listed and verify their credentials.
In addition to verifying who is making the recommendation, investors should be wary of the investment being recommended and make sure it is legitimate. As the age old adage goes: “If it sounds too good to be true, it usually is.” FINRA has taken steps to help investors educate and protect themselves from investment fraud by issuing guidance for even the savviest investors.
Fraudsters can be very persuasive and their sales pitch may sound legitimate but investors should take the time to ask questions and not fall prey to pressure tactics.
If an investor does fall victim to investment fraud time is of the essence. FINRA has compiled a recovery checklist for victims of investments fraud.Negligence
If the misrepresentation or omission is not intentional a negligence claim is more appropriate. The vast majority of brokerage accounts are considered non-discretionary accounts which require approval by investors of all transactions executed in their accounts. As a result, the information provided by financial advisor concerning an investment recommendation is relied upon by investors to make their investment decisions. If the information is incorrect or incomplete investors are placed at risk and brokerage firms can be held responsible for investment losses. This type of stockbroker misconduct can lead to recovery for investment losses.
The Silver Law Group can help you determine whether an investment loss is the result of a brokerage firm and/or their financial advisor’s misrepresentation or omission of a material fact. If an investor suffers losses as a result of a misrepresentation or omission of a material fact they may be able recover their losses in a FINRA arbitration claim. Contact us.