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Brokerage firms and the financial advisors they supervise are subject to securities industry standards of care established by the securities laws and FINRA rules and regulations. Negligence can be the basis of a securities arbitration claim in instances where the brokerage firms and/or financial advisors fail to adhere to industry standards of care in the handling of an investor’s account and as a result of the negligent act or omission the investor sustains investment losses.

Negligence is one of FINRA’s top 15 controversy types in customer arbitration claims.

How do You Identify Negligence?

Brokerage firms and financial advisors make representations to the investing public constantly. These representations may be concerning their financial expertise or their ability to manage investments for many specialized situations or to meet specific financial goals. They may make representations about particular investment products and investment strategies. These representations are made through the media, advertisements and publications.

Negligence does not have to be intentional to result in a viable securities arbitration claim for damages. A negligent act may simply be a misrepresentation or omission of fact.

If the misrepresentation or omission is not intentional a negligence claim is 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 or if the advisor fails altogether to mention the risks associated with the investment, investors are placed at risk and brokerage firms and the financial advisor may be held responsible for the resulting investment losses. This type of stockbroker misconduct can lead to recovery for investment losses.

A Brokerage Firm may be Responsible for a Stockbroker’s Negligence

Investors reasonably place their trust in the brokerage firms and their trusted financial advisors. These financial institutions owe their clients an obligation to adhere to securities industry standards of care in maintaining and monitoring client accounts. If this standard of care is violated, investors may suffer significant losses due to a brokerage firm and/or a broker’s negligence.

The negligence of a financial advisor can be the result of a lack of supervision (FINRA Rule 3110 Supervision) or lack of training (FINRA Rule 1250 Continuing Education Requirements) by the brokerage firm. In situations where financial advisors are unaware of important information that they reasonably should have known, a brokerage firm can be the subject of a negligence claim for the failure to supervise and adequately monitor the activities of the financial advisor.

To be held liable for negligence, it is not necessary for the financial advisor to have intended the consequences of the negligent act; it would be sufficient if the consequences arising from such an act would have been foreseeable. Liability could also be found if the reasonable steps to prevent such foreseeable consequences from occurring could have been taken by the financial advisor but he failed to act.

Contact Our Firm if You Believe Your Broker has Been Negligent and You Suffered Investment Losses

The Silver Law Group can help you determine whether an investment loss is the result of a brokerage firm and their financial advisor’s negligence concerning an investment recommendation. If an investor suffers losses as a result of negligence they may be able recover their losses in a FINRA arbitration claim.

Client Reviews
“My in-laws lost their retirement funds to a dishonest broker. Silver Law Group and Scott Silver aggressively pursued their losses until he got their money back.” Ben M.
“I foolishly gave my money to a con artist promising me a great return on my money. Scott Silver zealously handled the matter, recovering my losses.” Darren S.
“I almost lost a lifetime of earnings after trusting the wrong person. Silver Law Group guided me through the arbitration process and a mediation, always fully prepared and committed to my case.” Scott T.