In the last few weeks, our office has been getting many calls and emails from investors who have lost much of their savings in this wildly volatile bear market.   Investors want  to know if they have a claim against their stockbroker broker, and if so,  will we take their case?  The answer is always “It Depends.” 

If you yourself selected all of the investments in your portfolio, and used your stockbroker as little more than an order taker, then your stockbroker’s responsbilities are usually limited to making sure that your orders are correctly placed.  There are some exceptions for what we call “financial suicide” cases, in which a stock broker would have a responsibility to advise an investor against making foolish choices to purchase clearly inappropriate or unsuitable investments.  But, in most instances, if your investment losses result from investments that were not recommended to you, we would not take your case.

But, where  the financial advisor or stockbroker recommends an investment, and the investor agrees to purchase based on the professional’s recommendation, the law imposes clear duties.  A stockbroker has no responsibility to predict the future, of course, and the fact that a stock declines is not in itself grounds for a claim.  However, a stockbroker DOES have an obligation to make recommendations that are in line with your needs.  A stockbroker cannot recommend a portfolio made up of risky investments if you cannot afford to take the risks that come with that portfolio.  A conservative  investor who is advised to invest all of their  portfolio in preferred bank stocks and loses money probably has a valid claim — not because the preferred stocks lost money, but because of the big risk that always comes  with investing all the money in stocks, and all in one sector.  

The other area where we see finanacial advisors and stockbrokers breaking the law is in not adequately describing the risks associated with an investment.  As anyone who has been reading the business section of their newspaper has learrned over the last month, Wall Street was marketing some very complicated and  risky investments.  Many of the stcobrkers who have been selling CDOs, Auction Rate Securities,  and other complicated debt investments did not understand them themselves.  So how could they have possibly explained those risks to their clients?  The law requires anyone selling investments to disclose all of the important risk factors of the investment.  If that did not happen, you may have a valid claim. 

If you think your investment portfolio was mishandled, please give us a call at 503-222-7475, or go to our Free Evaluation Page and tell us what happened.

This entry was posted on Wednesday, October 29th, 2008 at 7:32 pm and is filed under Brokerage Failures, Uncategorized, investment law. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.