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Stockbrokers and advisers owe certain duties to clients. Some breaches of the duty owed to a customer could give rise to claims of negligence. Stockbroker negligence occurs when a broker or investment advisor’s conduct falls below the established industry standards designed to protect investors from an unreasonable risk of harm. When asserting a negligence cause of action against a broker-dealer or broker, the customer generally must establish four elements:

  1. the firm or broker owed a duty to the customer;
  2. the firm or broker breached that duty;
  3. the firm or broker’s breach caused injury to the customer; and
  4. the customer was harmed or injured as a result of that breach.

Typically, brokers and advisers owe a duty of care, duty of loyalty and duty of good faith and fair dealing in connection with the customer’s investment portfolio and account. Investment advisers, and in certain circumstances brokers, owe a fiduciary duty to customers. Examples of broker negligence can occur when a broker fails to properly diversify a portfolio, and instead over concentrates a customer’s account in one particular stock. In other circumstances, a stockbroker can be negligent by recommending unsuitable investments or a investment product to their client. If it is determined that a broker breached the duties it owes to customers, which results in injury or damages to the customer, the broker may be liable for losses and/or damages to that customer.

Broker-dealers or investment firms can also be found negligent. For instance, when a firm fails to implement adequate compliance or supervisory policies, procedures and systems, the firm may be found liable for negligence if their registered representatives and brokers are found to have violated securities laws, regulations and/or the firm’s policies and procedures.

Stockbroker negligence can lead to significant damages or losses to a customer’s investment portfolio. Our team at Lax & Neville LLP has experience prosecuting claims for victims of stockbroker negligence. While every case is different, we are proud to share our past significant wins with you. If you have any further questions regarding stockbroker negligence, contact Lax & Neville LLP today and schedule a consultation.

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