Can You Sue Your Brokerage Firm for Investment Losses

Yes, you may have a failure to supervise claim. According to FINRA rules, a brokerage firm has an obligation to implement policies and procedures that help monitor the activities of its brokers in order to guard against investor loss and investment fraud. It may be the brokerage firm, not the individual broker, that is at fault if there has been a failure to screen a new broker before hiring, ensure training and licensing, or if there has not been continued monitoring of the broker’s communications, account activity, and customer complaints.

Can I Sue My Brokerage Firm For Investment Fraud/Losses?

If anybody has been the victim of stockbroker fraud or broker negligence, they should be entitled to receive full and fair compensation for any of their financial losses. However, winning these cases and obtaining compensation can be incredibly challenging.

The claims process can be complex, and you can expect that the defendant in the case (the brokerage firm, a financial advisor, or both) will fight back aggressively against any allegations. It is vital for anybody who thinks they have been the victim a fraud on the part of their brokerage or financial advisor to speak to a qualified attorney as soon as possible. Most individuals who have experienced this type of loss do not have the resources or legal experience to investigate the situation fully.

When can a Brokerage firm be held liable for investment losses?

First, it is important to realize that liability for your investment losses may not be the sole responsibility of your financial advisor. It may be the case that the entire brokerage firm could potentially be held legally responsible for misconduct. Yes, a brokerage firm can be held liable for their own negligence. The negligence of a brokerage firm is often a key factor that allows individual financial advisors to commit fraud.

For example, while a single financial advisor may be the one who wanted to commit fraud in the first place, the brokerage could be held liable if they did not have a proper supervisory system in place to oversee the advisor. In these cases, the brokerage could be held liable for actions committed by the advisor that would have been detected and prevented had they been properly supervised.

Under Section 20(a) of the Securities and Exchange Act, the law includes what is known as the Control Person Liability standard which means that firms are liable for the misconduct of their representatives (the financial advisor) unless the firm acted in good faith and did not indirectly cause the misconduct.

However, proving that a brokerage firm was negligent, and that their negligence allowed individual advisor misconduct, can be difficult and often requires extensive investigation on the part of a qualified attorney.

When can a financial advisor from the brokerage firm be held liable?

All financial advisors, such as stockbrokers and investment advisors, owe what is called a fiduciary duty to their clients. Under American law, a fiduciary duty is the highest standard of care and requires financial advisors to:

  • act in their client’s best interests
  • put the interests of their clients above their own interests
  • execute their professional duties with a high level of skill and care

When a financial advisor falls short of their fiduciary duties, for whatever reason, they are guilty of negligence. If a financial advisor’s negligence contributes to an investor’s monetary losses, then the financial advisor may face a lawsuit and be held legally liable for damages.

Negligence in these cases can happen in many different ways. This includes, but is not limited to, the following:

Anytime an investor loses a significant amount of money due to the fraudulent or negligent activities of a financial advisor, the investor may be able to sue the financial advisor, the brokerage firm, or both in order to recover damages for their losses.

If you have been the victim of investment fraud, you may be able to sue the brokerage firm for failure to supervise in order to recover your lost funds. The investment fraud attorneys with Meyer Wilson represent investors nationwide, and have recovered millions of dollars in losses for our clients. Call us or complete our online form for a free case evaluation.