Securities fraud is loosely defined as any misrepresentation, by your investment advisor, of material information about your investment or the withholding of material information relating to the investments. It can be hard to identify all forms of this fraud, but there are some common “red flags” that may raise suspicions for you. You should contact a securities fraud attorney if any of these issues are raised, to help you determine if you’ve been the victim of investment fraud.
Red flag #1: Your monthly or periodic statement is inaccurate or contains surprises. You should reviews your statements soon after you receive them, and examine them closely. Make sure that you authorized or were notified about each transaction or trade listed. Similarly, make sure any trades you requested actually were done, and your instructions were followed. In addition, make sure that each trade is correctly labeled as “solicited,” meaning that your broker recommended it, or “unsolicited,” meaning that you requested it, based on your own investigation.
Red flag #2: Broker doesn’t meet with you to “rebalance” your portfolio each year. All your investments should be suitable for your current life securities fraud attorney circumstances, including such things as your personal risk tolerance, investment objectives, net worth, your retirement horizon, and current market conditions. At a minimum your broker should contact you at least once a year to help determine any changes in life circumstances and potentially “rebalance” your portfolio to meet your current needs.
Red flag #3: Broker won’t answer your questions or explain your investments to you. Your broker is there to explain things to you and answer your questions about your investments. If you ask questions and never get responses, such as your broker ignoring you, not really explaining or answering the question, or trying to pass the buck to someone else, you should become suspicious.
Red flag #4: You’re contacted by a superior or employer of your broker, even as part of a “routine” check. Even if you don’t notice anything suspicious on your own, your suspicions should be aroused if a superior of your broker or advisor contacts you. They may have noticed an irregularity that you did not. They may say it is merely a routine or convenience call, but this is rarely the case. Do not sign anything, nor try to defend your broker, but instead contact an investment fraud lawyer.
Red flag #5: Your broker tells you he’s giving you “inside” information. Trading on “insider” information is illegal, so don’t get mixed up with a broker that would share such information with you.
Red flag #6: Your account’s value drops substantially. There are, unfortunately, many non-fraudulent reasons why your account may drop in value, since all investments, are to some degree, inherently risky. However, this may be your life’s savings, so if you see a drop of around 25% or more you should contact a securities fraud attorney in your state to make sure you’re not the victim of stock broker malpractice or fraud.