Financial advisors are in positions of trust – they manage our life
savings, provide financial advice, and protect our best interests. Or,
they are supposed to. While most financial advisors are reliable and trustworthy
people, some unscrupulous brokers use their position of trust to take
advantage of their customers by stealing customers’ money.
In our firm’s experience representing investors for over 20 years,
we have seen broker theft carried out in a number of different ways, but
there are two schemes that occur most often.
First, in many broker theft cases, the broker solicits his or her customers
to purchase some type of investment, or engage in some type of business
dealings, that requires them writing a check. The check could be made
out to the broker or some entity that the broker controls. Instead of
using the customer’s money for a legitimate investment or business
deal, the broker diverts the money for his or her own personal use.
Second, brokers who set out to steal from their clients often do so simply
by making unauthorized withdrawals from their customers’ investment
accounts, either through forgeries, misrepresentations, or some other
method of concealment that works for a period of time.
The best thing an investor can do to protect him or herself from broker
theft is to be aware of common fraud tactics and to watch out for the
recognized "red flags." Never, ever hand your broker a check
payable directly to the broker or his or her own company. You should send
your money to the institution that is going to take custody of your money,
rather than the person who is selling you the investments.
It’s also important that you keep an eye on your investment account
statements to look for potential signs of unauthorized withdrawals. Theft
from brokerage accounts directly is unfortunately more prevalent with
elderly investors who are more vulnerable due to medical issues or cognitive
impairment – so it’s a good idea to follow up on your elderly
loved one’s accounts and their withdrawals as well.
The silver lining is that a person who has suffered financial loss because
of a broker’s theft often has options to recover their hard-earned
savings. Most often, the best solution is not to bring a legal claim against
the broker directly because he or she probably won’t be able to
satisfy a personal judgment. However, all brokerage firms have a duty
to reasonably supervise their brokers and vigorously investigate red flags.
It is our experience that theft cases often leave a trail of missed red
flags that were neither adequately identified nor investigated by the
If you suspect that a broker may have stolen funds from you or a loved one,
contact our firm today for a free consultation to discuss your legal rights.