Securities Litigation Attorney Representing Investors in New York and Nationwide
Most investors do not understand the intricacies of the financial world and trust their broker’s advice regarding which investments are best suited to meet their financial goals. Brokers are required to make investments that take into consideration a client’s personal aims and requirements, and a failure to do so may result in an unsuitable investment. If you sustained monetary losses because of unsuitability, you may be able to recover damages for your harm and should speak with a skilled securities litigation attorney to discuss your case. New York securities lawyer Irwin Weltz can assess the facts of your case to determine if your broker breached the duty to make suitable investments on your behalf. Weltz Law, will represent investors in New York and throughout the nation in securities litigation and arbitration. We will aggressively advocate on your behalf to help you hold your broker accountable for your harm.
Duties That Brokers Owe Investors
Unlike financial advisors, brokers do not have a fiduciary duty to their clients. While the standards imposed on brokers are less stringent than those imposed on financial advisors, brokers nonetheless have a duty to ensure that any securities that they buy or sell on behalf of their clients are suitable. The rules regarding unsuitability are meant to promote ethical sales practices and fair dealing and to uphold high standards of professional conduct.
The Financial Industry Regulatory Authority (FINRA) sets forth the duties imposed on brokers with regard to suitability in Rule 2090 and Rule 2111. Rule 2090 relates to suitability in that it requires that a broker know his or her client. In other words, the broker must obtain essential information about the customer. Additionally, Rule 2111 specifically sets forth a broker’s duties with regard to suitability. The Rule states that a broker must use reasonable diligence to obtain a client’s investment profile, which includes the client’s age, tax status, investment experience and objectives, risk tolerance, needs regarding liquidity, and other investments. The broker is then required to recommend securities transactions or strategies that the broker reasonably believes to be suitable for the client, based on the information obtained regarding the client’s investment profile.
Rule 2111 requires a broker to consider reasonable-basis suitability, customer-specific suitability, and quantitative suitability when recommending investments. Reasonable-basis suitability requires a broker to have a reasonable basis to believe that his or her recommendation is suitable for investors in general. This requires the broker to know the potential risks and benefits of the recommended security or strategy. The customer-specific suitability requirement is narrower and obligates the broker to have a reasonable basis to believe that the recommended security or strategy is suitable not only for investors in general but also for his or her client in particular. Lastly, quantitative suitability requires a broker to reasonably believe that a series of recommended transactions is suitable as a whole when considering the customer’s investment profile. A broker is prohibited from recommending a securities transaction or strategy unless the broker reasonably believes that it is within the client’s financial means.
It is an unfortunate reality that brokers often fail to uphold the duty to make suitable investments, and unsuitability claims are among the most common claims in securities litigation. If you believe that the investments that your broker made were not appropriate, given your goals and financial resources, you should consult a knowledgeable attorney to analyze whether you can pursue claims against your broker for unsuitable investments.