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You may have lost money in your investment portfolio,
due to mismanagement and not even know it.

Recent SEC probe highlights unsuitable trading, churning

Good-faith investors were essentially "doomed" by strategies pursued by several advisers at one investment brokerage, notes a recent Investment News article chronicling fraudulent practices that yielded sharp losses for customers.

The SEC has taken legal action against three brokers who worked in past years for a New York investment company. An enforcement director with the commission states that their conduct flatly eliminated "any realistic possibility of … making money for anyone other than themselves."

That certainly wasn't the pitch they directed at their target audience, which the SEC alleges hyped their pronounced acumen in securing outsized market returns for investors.

In fact, charges the agency, there was no hope of such an outcome, given the brokers' "excessive in-and-out trading" that created havoc in customers' accounts.

All the brokers engaged in a systematic pattern of unsuitable trading activity and churning, states the SEC. One of them has already reached a settlement with the agency. The other two individuals are soon slated to be named defendants in a federal court action.

Regulators say that the brokers all engaged in frequent trading that personally enriched them through commission income while reducing account values for customers.

Excessive and inappropriate churning activities aimed primarily at enhancing brokers' bottom lines in lieu of generating profits for investors can also yield this downside, even in instances where a customer does derive gain: churning can create taxable events that create liability for customers.

It can sometimes be difficult for an individual or business entity to reasonably assess whether investment losses owe to the vagaries of the market or to something more insidious and sinister.

Questions or concerns regarding possible broker/adviser misconduct can be directed to a proven securities attorney who advocates solely on behalf of aggrieved consumers in investment fraud matters. An experienced advocate can closely investigate a given matter and, when necessary, take strong legal action aimed at securing a maximum recovery for a harmed plaintiff.

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