Reasonable-Basis Suitability

Securities Litigation Attorneys Representing Clients Nationwide

Most brokers have the power to trade securities without permission from investors. They make key investment decisions on behalf of their clients. Even though they have a fiduciary obligation to act on their best interests, some engage in fraudulent or dishonest behavior that allows them to profit at the expense of their investors. Excessive trading is a form of broker action that can lead to huge losses for investors while benefiting brokers and brokerage firms. In case you have been a victim of excessive trading, and you would like to file a lawsuit, talk to the securities litigation attorneys at Weltz Law. We will proudly use our knowledge and skillset to ensure you get the compensation you deserve in no time.

Excessive Trading

Excessive trading takes place when a stockbroker or brokerage firm trades beyond an investor’s goals to generate more commissions to their account. This practice is common among dishonest brokers and may be grounds for a civil or criminal legal action. Excessive trading claims are often tied to breach or misrepresentation of fiduciary duty. Brokerage firms or brokers who engage in this act may give inaccurate information to their clients with the hope of persuading them that excessive trading is critical, or may fail to inform them about the dangers of excessive trading. There are many federal and state laws that allow investors to make a claim against excessive trading.

Proving Excessive Trading

A claim against a stockbroker or brokerage firm will be successful if an investor can prove a few things, including:

  • The brokerage firm or the stockbroker controlled all the activities in the account.
  • The activities in the account resulted in excessive trading based on the investor’s investment objectives and risk tolerance.

If you suspect you have suffered losses as a result of excessive trading, you can bring an arbitration claim against your stockbroker. The securities arbitration panel will analyze a number of factors to ascertain whether the stockbroker had full control of the account, including:

  • Prior securities investment experience with the client
  • The level of knowledge the client has about the investment strategy
  • Client reliance and trust upon the brokerage firm or stockbroker
  • Level of client’s sophistication including occupation and education

Penalties of Excessive Trading

Federal and state laws prohibit material misrepresentations and fraudulent behavior related to sales of securities. Excessive trading is a violation of 18 U.S Code Section 1348, Rule 10B-5 of the Securities and Exchange Act of 1934, and many other existing laws. This offense carries different penalties that vary from state to state. It’s worth noting that stockbrokers and brokerage firms can also be charged for falsifying investment documents to conceal excessive trading with a violation of regulations outlawing the falsification of business documents. For the success of your lawsuit, you need to have an experienced securities litigation attorney from Weltz Law on your side.

Suitability Supervision?

Meet with a Seasoned Securities Litigation Attorney to Discuss Your Excessive Trading Case

At Weltz Law, we have helped thousands of investors recover millions of dollars in losses in FINRA arbitrations. In case you believe there has been excessive trading in your account, or you suspect your stockbroker has been recommending transactions to generate commissions and not to pursue your investment strategy, contact us at 877-935-8952 or fill the online form for a free consultation to discuss your needs and rights.