Stock Losses

While everyone dreams of hitting it big with soaring stock prices, the reality is that losses—at one point or another—are inevitable. Many investors seeking growth and security turn to investment professionals to reduce the risk of unnecessary losses. Nevertheless, individual investors should play an active role in managing their investments in order to avoid losses from potential broker misconduct.

Could My Stock Losses Be Due to Broker Misconduct?

While stock losses are an inherent part of investing, not all losses are caused by market fluctuations. Many losses may be attributed to broker misconduct. Identifying whether your stock losses are a result of broker misconduct can be challenging.  Certain “red flags,” however, may suggest foul play. These indicators may include:

• Unauthorized Trades: If you notice transactions that you did not authorize or were not part of your agreed-upon investment strategy, this is a clear red flag.
• Excessive Trading: Also known as “churning,” this is when a broker makes an excessive number of trades in your account primarily to generate commissions. 
• Misrepresentation and Fraud: Review your communication with your broker. If your broker provided false or misleading information about an investment, it may constitute fraud. 
• Failure to Follow Instructions: If your broker ignores your instructions regarding your investments, risk tolerance, and investment objectives, this could be a sign of misconduct.
• Overconcentration: If your broker recommended concentrating a significant portion of your portfolio in a single investment or asset class, this may indicate misconduct.
• Excessive Fees and Commissions: Regularly review your account statements. Broker misconduct may involve overcharging for services or making investments that primarily benefit the broker.
• Inconsistent Investment Strategy: If your portfolio lacks coherence and consistency in its approach, it may be a result of broker misconduct.
• Unexplained Losses During Bull Markets: If you experienced significant losses during a period when the broader market was performing well, it may raise suspicions of broker misconduct. 
• Sudden Account Activity Changes: Pay attention to any sudden and unexplained changes in your account activity, including large withdrawals or transfers. 

Protecting your investments and holding brokers accountable for their actions is crucial to maintaining trust and integrity in the financial markets. If you suspect broker misconduct but are unsure, consider seeking a third-party opinion, such as an attorney with expertise in securities law. They can review your investment history and documentation to identify any irregularities.