David Meyer & AssociatesRepresenting Individual Investors and Consumers Against Corporate Misconduct
What are some examples of the most common types of stockbroker misconduct?

Explained in this section are some of the most common improper investment tactics of which investors and their trusted advisors should be aware.
This list is not all-inclusive but is intended primarily to assist investors in recognizing whether they may be able to recover some or all of their losses. Consultation with an attorney experienced in securities arbitration matters is recommended for those who believe they may have suffered losses as the result of stockbroker misconduct.

 Unsuitability
 Breach of Fiduciary Duty
 Churning
Unauthorized Trading
 Misrepresentations/
   Omissions
 Overconcentration
 Fraud or Theft
 Failure to Supervise
 Registration Violations

Unauthorized Trading


A broker who buys or sells securities in an investor's account without the prior consent of the investor has engaged in unauthorized trading. Investors must consent to a purchase or sale of a security in their account, unless they have given the broker written discretionary authority (which is rare) to make transactions on their behalf. Even in the case of discretionary accounts, a broker cannot misuse or exceed that authority and make a commission on trades he or she was not authorized to make. Unidentifiable debits or credits on monthly statements may be an indication that a broker has traded securities without proper authorization.

Misrepresentation/Omission

Misrepresentation involves a breach by the broker of his duty of good faith not to misrepresent any "material" fact to the investor in the sale or recommendation of an investment. Material facts include facts that address the nature or quality of the investment or the degree of risk involved . An "omission" is similar, but in that situation, a broker has failed altogether to disclose a fact material to the investor's decision-making process.

Overconcentration

One of the most important rules of investing is diversification of an investor's portfolio to provide protection against a decline in value of one particular investment. If a broker concentrates an investor's funds in any individual investment or type of investment - only high-risk stocks, for instance - then the risk associated with the portfolio is dramatically increased.