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Securities Fraud Attorneys Representing Clients Nationwide
Chances are, you expect your financial broker to be well-informed about the investment products they recommend you. Furthermore, it is with the understanding that they have done the relevant research before presenting any recommendation to you. However, this is not something to be taken for granted: sometimes brokers may be misinformed about the products they recommend you or they can deliberately mislead you for fraudulent reasons.
As your broker is often the first person you turn to for financial advice, it can feel like you are all alone when the broker-client relationship is shattered. Our team of attorneys at Weltz Law has years of experience representing investors who have been victims of securities fraud and will do our best to assist you.
Reasonable Diligence
Under FINRA’s Rule 2111, all brokers have suitability obligations to their clients. Simply put, this means that brokers should ensure any investment products they recommend fit with their client’s investment profile. However, when suitability obligations are not met, this can be due to the failure to conduct due diligence into an investment product. What this means is that financial firms and brokers have the responsibility to conduct all relevant research into investment products before recommending them to clients. This research encompasses an investigation into the issuer, its management and assets as well as the securities they recommend.
The Process of Verifying Due Diligence
Firms and brokers who comply with the requirement of due diligence perform independent research on the investment product before recommending them to clients. This includes but is not limited to: identifying any red flags that pop up with the product or issuer as well as addressing concerns potential investors may have. Depending on how big or small a firm is, there can be an entire department dedicated to due diligence. In smaller firms, usually one or two qualified persons are in charge of the process. The purpose of this research is for firms to verify the authenticity of the claims and offerings made by the issuer in the best interests of the client.
Dealing with Conflicting Interests
If the issuer happens to be associated with the financial firm in some way, such as being an affiliate or employee, the process of due diligence additionally helps to mitigate any conflicting interests. This protects investors by ensuring that the investment products on offer do in fact align with their needs and are not just promoted to benefit the firm and its affiliates.
