How Brokers, Advisers and Other Financial Professionals Mislead Investors

Watch Out! That Seemingly Innocuous Recommendation Could Be Fraudulent

As a July 12 U.S. News Money article recently discussed, the flood of Ponzi schemes and overt investment scams that have been making headlines over the last couple of years has caused some investors to lose sight of a more subtle, but just as costly, type of investment fraud: misrepresentations and omissions.

Despite the latest headlines, most investment fraud cases don’t involve decades-long schemes, bogus account statements, or outright lies. Instead, a large number of investment fraud cases involve brokers, advisers, and other financial professionals who (like the Phoenix-based advisor who allegedly failed to disclose an important conflict of interest before recommending investments to his clients) neglect to disclose material facts or make claims about particular investment products or strategies – despite the fact that those claims may be false or misleading – in order to make a sale.

Common examples of misrepresentations and omissions include

• Mention of “guaranteed” results or returns;
• Failure to disclose the commissions and fees associated with a product or investment opportunity;
• Inaccuracies in, or overly rosy portrayals of, an investment’s historical performance; and
• Unsupported claims about investment strategies or particular products.

While you probably know to be wary of opportunities that seem too good to be true, you may not know how to recognize more subtle forms of fraud. To classify as false, a claim doesn’t have to promise fast or overly large returns.

In fact, most false representations take the form of seemingly innocuous advice, such as the recommendation to invest only in actively managed funds or the recommendation to move retirement savings into a variable annuity.

Stockbrokers, investment advisors, and other financial professionals are required by law to provide you with all of the important and essential information about a potential investment opportunity or securities product before you invest. If they don’t provide you with this information, or if the information they provide you with is false, it could be considered a “misrepresentation” or “omission” on the part of the professional and he or she may be held liable for any losses you incur as a result.

If you believe you have suffered investment losses due to the misconduct of your broker or financial advisor, simply fill out our easy online contact form, or give us a quick call to get a free consultation about your case.


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