What You Need to Know About Securities Fraud: Misrepresentation and Omissions
We see commercials and advertising all the time, and we're used to sales pitches that leave some details out or carefully represent a product in its best light. However, when it comes to investing in securities, that kind of marketing practice is frowned upon -- and may be illegal.When you speak with your stockbroker or financial advisor about a potential investment opportunity, you have a right to all the important information associated with the investment. Your stockbroker, investment advisor, or other financial planner is bound by law to disclose this information to you before you hand over your cash. If a broker makes misleading statements about an investment or fails to give you the information you need, then it could be misrepresentation, and you could be headed for FINRA arbitration. As securities fraud lawyers, we often see misrepresentation or omissions in the form of:
- "Guarantees." Very little is set in stone when it comes to investing in securities, and you should be suspicious of any claims that guarantee high returns, that an investment will definitely do well and go up, or that there is "no risk."
- Commissions and fees. Your broker or advisor is required to disclose information to you about fees and commissions associated with any investment. If you were not informed of fees and commissions in connection with a security, it could be considered misrepresentation or an omission.
- Performance. When looking at the performance history of an investment, be aware that it can be easy to paint the performance in a flattering light. For example, a non-traded REIT may report its offering price for four or five years before an actual market value is established, so it is difficult to gauge its actual performance. Your broker or advisor has a duty to look into the investment and give you an accurate idea of its practical performance.