Understanding investments can be a difficult thing to do for the average person. That’s why the expertise of financial advisors and stockbrokers can be so useful when deciding how to invest your money. But what happens when you take the advice of someone else and you lose money? You might be wondering if there is a way to get your money back. The answer is yes in certain cases. If a broker or advisor commits misconduct when it comes to your investment then you may be entitled to recover your losses. Investment misconduct can fall into different classes from investment fraud to a negligent broker to being liable through omissions. Here we will take a look at the most common types of investment misconduct in which you will be able to recover your losses.

Common Types of Investment Fraud & Misconduct

Breach of Fiduciary Duty 

Breach of fiduciary duty is the most common type of advisor misconduct. Financial advisors are investment professionals and have an increased knowledge of investment markets. Because of this when an investor places their trust in an advisor  and the advisor owes them “fiduciary duty” when it comes to handling their money. An advisor is in breach of their fiduciary duty if they place their interests or their firms ahead of their clients. If an advisor also does not monitor changing markets or acts responsibly and with care in regard to their clients interests they may also be in breach of fiduciary duty. Finally an advisor also has the duty to advise a client on all the potential risks and benefits of any given investment. 

 Unsuitable Investment Recommendations 

While fiduciary duty does not apply to stockbrokers they are still subject to suitability rules. What this means is that brokers must take their clients needs and financial situation into account when recommending an investment. If the broker does not meet FINRA’s suitability standards then you may be able to sue to recover your losses. 

Misrepresentation by Omission

If you go to a financial advisor or broker then it is import they relay all the facts to you about an investment decision. They are legally required to disclose all relevant information about an investment. Some shady brokers or advisors may try to omit details about an investment in order to trick you into making an investment. In a case like this you will be able to sue to recover your losses. 

Failure to Adequately Supervise 

If you invested through a brokerage firm you might not know that firms are required to have a system in place to supervise their financial representatives. The Securities Exchange Act makes brokerage firms liable for losses if they do not adequately supervise their financial advisors. Failure to supervise claims can vary from inadequate hiring processes to failure to effectively monitoring interactions with investors. To learn more you should contact an attorney. 


Selling Away


Selling away is a type of investment misconduct that occurs when a broker sells securities to an investor that are not overseen by their brokerage firm. A broker might act in their own self-interest and engage in selling away to get higher commissions associated with risky investments or to avoid their firms compliance department. If you suspect you broker is guilty of selling away it is a good idea to contact an attorney about recovering your losses. 

Unauthorized Trading

This is one of the more malicious forms of investment misconduct that your advisor or broker can engage in. This is when your representative makes trades without getting the express permission of a customer. You do not need to let your broker trick you into thinking that you need to accept your losses because investments are risky. You can sue to recover your losses. 


Churning is a type of fraud that happens when a broker makes an excessive amount of trades in order to increase their commissions. Brokers receive commissions on each investment they make and a broker can increase their profit by making an unreasonable amount of trades. 

Lack of Diversification

There is substantial risk involved with putting all your money into a single investment. That is why it is important for your broker to create a diversified portfolio for you. If for any reason your broker fails to diversify your portfolio and you lose money an investment you may be able to make a claim against your broker. 

Ponzi Schemes 

A Ponzi Scheme is where someone solicits and investment from someone and uses previous investments to pay them back. In this type of investment fraud there is no actual investment the fraudster is simply paying back previous investors with new money that comes in. 

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