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Retirees Should Be on Guard for Stock Broker Fraud

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The majority of Americans who invest in the markets do so by means of their retirement and pension plans; that is, 401K and defined benefit plans put into place by generous employers for the benefit of their employees. When employees retire and move on they often are faced with decisions about what to do with their money. This is a time when an investor must be on guard for stock broker fraud in the marketplace.

In many instances, absent any formal education on investing, investors rely on stock brokers who solicit for their business. Cold calls, direct mail and other marketing materials flood the homes of retirees from investment advisors seeking to develop new clients. When faced with decisions about who to invest with and what to invest in retirees should consider the licensure of the broker, the reputation of the broker and his employer, the independence of the advisor and the variety of the product lines in which the broker is able to deal, the amount of money the broker maintains under management as well as the fee structure, the type of investment opportunities offered, the goal and investment and strategy and the level of risk.

As attorneys handling broker fraud and neglect claims, we see four primary avenues of abuse where elderly investors frequently exposed. First, there is a the concern for outright fraud which can include situations where the investment is a bogus investment or a type of ponzi scheme and representations about the product are simply false. Second, the question of investor suitability for legitimate but high risk investments: that is, the broker has failed to make an appropriate investigation into the level of risk to which the client should and is willing to be exposed. Third is a concern for churning; i.e. where the broker is constantly moving investments from one vehicle to the next and generating large broker fees from such efforts diminishing down principal. Finally, we are seeing an increase in investment advisors taking fees for assets under management and doing very little if anything to manage the assets once the are originally invested regardless of the status of the market.

When these circumstances develop, it is appropriate to consult a lawyer to determine if you are the victim of broker fraud or neglect. When fraud is present a claim for securities fraud can result in recovery of losses.