Investment Advisor Misconduct
An investment advisor is a professional
who renders investment advice to individual investors for
a fee. Investment advisors generally have discretion over
client accounts to invest without approval from the client
for trades and as a result have a fiduciary duty to act in
the best interest of their clients. Investment advisors sometimes
breach this fiduciary duty and/or violate legal and ethical
responsibilities to their clients. Investment advisor misconduct
includes:
- Failure to Diversify: Failing
to sufficiently diversify a client’s account among
asset classes and inside assets classes to meet a client’s
objectives and risk tolerances and to control risk and
avoid excessive loss.
- Misrepresentation & omissions: Misrepresenting
or omitting the characteristics of certain investments
or overall account characteristics (such as risk profile)
to the clients.
- Suitability: Recommending
investments or overall accounts that are not suitable for
a particular client's objectives, needs and risk tolerances
taking into account the client’s age, family situation,
and financial assets.
- Stock manipulation: Manipulating
stock prices for personal or corporate gain in violation
of state and federal law.
- Variable annuities Fraud:
Including recommending unsuitable annuities to increase
the broker's commissions, not completely explaining the
long-term investment characteristics of annuities, or
failing to completely advise investors about the associated
risks.
- Criminal or fraudulent
activity: Including investments
or trades made away from the firm that the advisor is
employed with, theft, forgery or embezzlement.
- Negligence: Failing
to meet the proper standard of care with regard to the
account.
In many investment
advisory cases clients have signed arbitration agreements
which require private arbitration frequently at the American
Arbitration Association (AAA). The Partners of LAX & NEVILLE,
LLP, have litigated and achieved millions of dollars of recovery
for clients at AAA arbitrations.
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