Investing is a risky business, however when investors choose a stockbroker to handle their financial portfolio, they expect the broker will behave in a manner that will seek the better good of the investor.
Unfortunately, due to stockbroker negligence and fraud, many investors find themselves losing money in situations that were unnecessary and could have otherwise been avoided.
Sometimes investors will lose money simply because they chose a bad investment, other times however, there may be more sinister tactics involved.
One area where stockbroker negligence may come into play is in suitability.
A stockbroker is required by law to ensure that they recommend investments suited to their client based upon age, education level, their income level, and their net worth.
The stockbroker is also required to match their investments according to the purposes or objectives stated by the client.
If the stockbroker chooses investments that do not match the client’s objectives, they are guilty of stockbroker negligence.
Another example of stockbroker negligence is churning, when a broker uses excessive activity with investments to earn commissions.
They may be guilty of practicing excessive turnover rates, when there were never any measurable changes in your stocks.
They may hold the stocks for a very short period of time, then churn them, only to earn their own commission.