Common Cases

Cases We Have Handled
Suitability Cases

This is the most common type of case that we handle. It occurs when a stock broker or financial advisor recommends a security or strategy to the customer that includes too much risk. Every customer is asked for his or her investment objectives and risk tolerance when they open a securities account. Their stock broker or financial advisor should be guided by that information in recommending investments to the customer. If the financial professional recommends and then purchases a stock, bond, or other security that has more risk in it than the customer wanted to take, and subsequently the security goes down in value, there is a potential case for breach of fiduciary duty against the financial professional and the brokerage firm, and recovery of the customer's losses is possible. We have recovered millions of dollars for clients who were wrongfully recommended unsuitable securities.

Private Placement Investments

We have successfully handled cases in which stock brokers, financial advisors, insurance agents, or other financial professionals have solicited customers to invest in private investments that are not sold on national stock exchanges. Often, misrepresentations as to the investment's safety and potential for growth and liquidity have been made to the customer by the financial professional. The high risk involved in these investments are often concealed. In these cases, the investment goes down in value over time and becomes illiquid, making it impossible to sell the investment. All the while, the financial professional continues to make misrepresentations to the customer, pleading with the customer to be patient and insisting that the investment's value will return. Even if the brokerage firm had not authorized the sale of this investment and did not know that the broker or investment advisor had solicited and sold the investment to the customer, it may still be possible to hold the brokerage firm, insurance company, or other financial institution liable for the acts of its employee.

Trust Accounts

We have been successful in recovering significant damages for trust accounts that underperformed the markets while under a bank's management. This type of case may be looked at as "reversed churning," where a bank has received a large annual fee to manage the securities in a trust account that the customer may or may not have inherited years earlier. Rather than actively trading the account in a prudent manner, the bank only passively trades the account, resulting in underperformance of the account year after year.

Boiler Rooms and Cold Calling

Cases involving "boilers rooms" and "cold calls" are a common type of case that we handle. Often, an unsophisticated person or senior citizen with limited savings will receive a telephone call from a high pressure salesman working for a small brokerage firm in New York or Florida. Misrepresentations will be made that the person calling is a very experienced stock broker who will give quality personal service to the customer. Misrepresentations are also often made that the broker has information on relatively unknown stocks, telling the customer that if they invest in the stocks, they will make a lot of money in a short period of time. Sometimes, "bait and switch" is used, which is when the investment increases in value a small amount at the beginning, which results in the customer being encouraged to invest their entire savings with the broker. What usually follows is a long spiral of losses in the investments that were solicited by the broker. We have been successful in these cases time after time because these misrepresentations and concealments are fraud under California law.

Securities Accounts Used as Collateral for Loans Made Through Your Brokerage Firm

We have successfully handled cases where a customer at a brokerage firm is encouraged by their stock broker or financial advisor to take out a loan from a bank that is affiliated with the brokerage firm in which the customer's securities accounts are used as collateral. In these cases, the value of the account plummets when the market has a down cycle, resulting in the bank foreclosing on the account and liquidating it to repay the loan. The problem is that when the market reverses and increases in value, the customer no longer has their securities that would have increased in value and made back the losses. In 2013, our firm obtained a seven-figure arbitration award against a national brokerage firm on the grounds that the investment strategy of using the account as security for the loan was a breach of the firm's fiduciary duty to the investor. Read the Reuters news article for more information.

Unauthorized Trading, Churning, Margin, Overconcentration, and Ponzi Schemes

We have represented customers successfully in cases that have involved the above violations of law. Unauthorized trading, churning, margin trading, overconcentration, and Ponzi schemes can all be a basis for a claim of securities fraud and breach of fiduciary duty. Depending on the facts of the specific case, damages are often recoverable against the brokerage firm and the financial professional.