How to Sue A Stock Broker For Fraud

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By Kaleem Ullah

According to the Federal Trade Commission, millions of Americans suffer from financial fraud every year. More than 2.5 million reports of financial fraud were filed last year alone. As financial advisors, we are supposed to help our clients make sound financial decisions.

Unfortunately, there are some bad apples out there who are more interested in lining their own pockets than helping their clients achieve their financial goals. In this blog post, we will share tips on how to avoid financial advisor fraud if you’re considering working with a financial advisor.

Stock broker fraud is a form of securities fraud that occurs when someone uses their broker to defraud a client. Many investors hire brokers to buy and sell their stocks and other securities. Because they don’t have the expertise to trade their own securities, they trust their brokers to make the best trades for their accounts. 

However, broker churning can violate this trust and breach the broker-client relationship. Stock broker fraud lawyers can help victims hold those responsible for their losses accountable. The best to sue a financial advisor or stock broker for losses is to first talk to an investment fraud lawyer.

Unauthorized trading

Unauthorized trading is a type of stock broker fraud that involves a broker placing trades without the client’s authorization. This is illegal and must be reported immediately to a securities attorney. While this type of fraud is difficult to prove, it is not impossible if you have the right legal representation. If you have been a victim of this type of fraud, you may be entitled to recover the losses that have been caused.

Brokers who engage in unauthorized trading in client accounts are in violation of the Securities and Exchange Commission’s (SEC) rules. It is also against the law to place the broker’s own interests above their clients’. The unauthorized trading practice is one of the main signs that a broker is not working in your best interests.


A common form of stock broker fraud, forgery involves altering a document to defraud investors. While forgery is not a crime in and of itself, it is an infraction that can be particularly damaging to investors. Brokers who forge documents often do so to obtain a larger commission. In one case, a broker allegedly submitted unauthorized annuity applications to clients on their behalf and electronically forged their signatures using the DocuSign online signature service. This fraudulent practice generated $68,000 in commissions.

In other cases, brokers use forgery to steal money from clients or to conceal their own misconduct. These fraudulent practices are especially egregious because they tarnish the entire profession. Victims of such misconduct should seek legal action against their broker.


Stock broker fraud is a common type of financial fraud. It typically involves misrepresenting information about investments to investors. This can happen with securities that are highly volatile or risky, and sometimes the investor may not become aware of the mistake until he has already lost money. In these cases, the investor may file a claim with the Financial Industry Regulatory Authority, or FINRA, to rectify the situation. He may also choose to settle his case through arbitration or mediation. In either of these processes, an independent third party will resolve the conflict between the two parties.

Misrepresentation in stock broker fraud can also include failure to disclose material facts that would have caused the investor to make an investment decision. In these cases, the broker knowingly omitted certain facts in order to earn more fees and commissions from the investment. If the investor relied on this misrepresentation, then the broker was in violation of the law.

Misappropriation of funds

A stockbroker may misuse a customer’s money for personal use. This may occur through investments in fictitious promissory notes, hedge funds, or alternative investments. A stockbroker may also invest client funds in entities that he controls or for which he receives substantial fees. A thorough examination of an investor’s financial records can often reveal a stockbroker’s misappropriation of funds.

Investors should closely monitor any withdrawals of funds without prior approval. A fraudulent stock broker may try to hide these withdrawals. Another example of broker theft is the use of investor funds in a Ponzi scheme. For example, a broker might use investor funds to pay off previous investors. While this may seem straightforward, it is important to remember that broker theft can be extremely creative. In the past, investor disputes and regulatory actions have shown that brokers can try to hide their theft by presenting fictitious account statements.

FINRA Rule 2150

FINRA Rule 2150 on stock broker misconduct was issued after a case where a registered representative failed to disclose certain information to a customer. The customer then contacted FINRA to report the matter. The broker was subsequently fined $10,000 and suspended for 30 days. The company also compensated the investor for additional damages.

The AWC also noted that a broker is prohibited by FINRA Rule 2150 from guaranteeing losses in a customer’s account. This can be a big problem for brokers who try to settle small disputes with customers. The theory behind these payments is to retain the customer and keep thousands of dollars in annual commissions and fees. However, this can lead to a case where the customer is the one who loses money.

Signs of a fraudulent investment scheme

Fraudulent investment schemes are usually a result of unscrupulous stock brokers. These frauds often involve unregistered securities, such as stocks, bonds, notes, or hedge funds. They can also involve fictitious instruments, such as oil or gas deals. You should be suspicious if you are offered too-high-yielding investment plans. Overly-consistent returns are another red flag. Even stable investments can go through hiccups.

Another red flag is if your stock broker makes a lot of trades without reason. This is called churning. The stock broker who is getting paid by commissions is usually trying to boost his income by making as many trades as possible. This practice results in a higher profit for him. Moreover, if your broker encourages you to lie on your investment application, it’s a sign of a fraudulent scheme.

Options for recovering investment losses

Investment losses caused by stockbroker misconduct can be difficult to recover, but there are options available to investors. Most investors are able to recover some of their investment losses with little or no cost. This article will discuss some of these options. The first step is to identify fraudulent pitches and determine your legal options.

The next step is to contact an attorney to investigate your claim. It’s important to act quickly and document all of your losses so that you can determine the proper course of action. There are statutes of limitations for these types of claims, so filing a claim early is crucial. In addition, the amount of losses you’ll need to prove is usually much greater than standard market losses. For this reason, it’s important to retain the services of an accountant or an attorney with experience in stockbroker fraud cases.