March 6, 2013 – Investor abuse is at an all-time high, and the elderly are most at risk. For investors who lose money due to stockbroker misconduct, there are options for recovery. In this video, attorney Jeff Salas discusses how financial abuse occurs, reveals the tell-tale signs of investment harm, and explains how investors can bring claims for harm caused by inappropriate investment sales.
Who Are the Victims?
Financial abuse happens to everyone, but with the elderly this abuse is reaching epidemic rates as stockbrokers and financial advisors take advantage of the complicated financial landscape to convince older persons to take on risky, high-commission investments and investment strategies.
How Does It Happen?
Often the investor is not told the investments are risky. There are several techniques brokers use: the free dinner and then the pressure to invest; promising good returns with a guarantee that the money will be there when they need it; and the promise that the investor can get out at any time.
Jeffrey M. Salas, DePaul 2006, is a founding partner of Salas Wang LLC, headquartered in Chicago. He concentrates his practice in securities arbitration and litigation and has represented clients in a variety of securities, financial fraud, corporate governance, breach of fiduciary duty, and breach of contract actions in state and federal courts around the country.
How Can You Prevent It?
Brokers and broker-dealers are regulated by the Financial Industry Regulatory Authority (FINRA), whose mission is to protect America’s investors by making sure the securities industry operates fairly and honestly. Investors should: research their broker and the firm on FINRA’s webpage, make sure they know what they are investing in, get an opinion from another broker, and finally – use the smell test, “If it smells too good to be true, it is.”
The FINRA website has numerous resources investors can use to locate, among other things, a broker’s history, investment scam alerts, and explanations regarding investment products. Unfortunately, many investors simply do not take the time to use these resources, and otherwise lack the sophistication to properly protect themselves from fraud and abuse. That is the heart of the dilemma, and far too often, a customer’s best bet is to bring an action in FINRA after the fact. Holding bad brokers accountable remains a strong deterrent and facilitates good regulation of the industry.
How do You Know If You Have Lost Too Much Money?
Red flags to watch for include investments in an LLP or nontraded real estate investment trusts, or excessive trading. Excessive trading is called “churning.” Churning occurs when a securities broker buys and sells securities for a customer’s account, without regard to the customer’s investment interests, for the purpose of generating commissions.
If You Have Lost Too Much Money What Can You Do?
The broker will always say a loss is a product of the market, not bad investments, but there are some things investors can do. FINRA has a dispute-resolution division, where most customer claims are brought via arbitration.