Litigation

By: Daniel M. Hanifin

“Selling away” is when a broker leads an investor to investments that are not offered through their brokerage house. Investing in securities outside of your brokerage account can be extremely risky, because investors will miss important investor protections that flow from the broker’s and the firm’s regulatory obligations, including the firms supervision of the brokers activities.

These investments are often presented as “alternative investments” or “outside investments.” Investors are often lured to these investments by promises of high returns with low risk. Another common theme in these cases is a representation by the broker that he/she has personally invested in the investment. Outside investments can take many forms including unsecured notes, limited partnerships, and limited liability companies.

Many of these alternative investments are in reality Ponzi schemes. Ponzi schemes are fraudulent alternative investment schemes that typically attract investors with promises of high returns and the investment initially produces some nice returns. However, these returns are money of subsequent investors. Ponzi schemes continue to pay investors with money received from subsequent investors, but eventually collapse when the well of new investors runs dry.

FINRA, the Financial Industry Regulatory Authority, takes these types of claims seriously. In April 2010, an arbitration panel in Kansas, awarded an investor more than $500,000 in damages flowing from her investment in two outside companies that her broker recommended.

If you think you have been a victim of one of these fraudulent investment schemes please contact Daniel Hanifin at (610) 692-1371.

By: Stephen P. Lagoy

Investment losses? Here’s an article that explains how you may be able to use arbitration to recover.

http://www.usnews.com/money/blogs/Fund-Observer/2009/09/23/could-arbitration-help-you-recover-investment-losses.html

For more information on how arbitration, mediation and alternate dispute resolution can help you and your business, contact our office.

BY: Daniel Hanifin

The fact that your investment has decreased in value or that you, like millions of others, have lost money does not automatically mean that your broker or brokerage firm has engaged in actionable misconduct. Almost all investments involve risk and there is no bailout when you lose money in risk appropriate investments. However, if your investments have decreased in value as a result of action or inaction by your broker, you may have a valid claim. Below are several common claims against investment professionals/brokerage houses:

1. Recommending unsuitable securities: Claims for suitability arise when an investor is advised to purchase or sell a security that is unsuitable given – an investor’s age, financial situation, investment objective and investment experience – the investor’s profile. Claims for suitability can be based upon a recommendation of a certain type of security, a certain class of securities, the amount of an investment or the frequency of transactions.

2. Misrepresentation/Omission: These claims arise when an investment professional misrepresents or fails to disclose material facts concerning an investment, including but not limited to, a failure to disclose: a) the risks associated with an investment; b) the fees associated with a particular investment; and c) company financials, such as bond ratings.

3. Churning: A claim for churning arises when an investment professional engages in excessive trading within an investor’s account in order to generate commissions.

4. Failure to Supervise: Brokerage houses have an affirmative duty to supervise the activities of their brokers and a failure to do so may be the basis of a claim.

This is the first in a series regarding investor rights and securities litigation. For more information on the legal rights and responsibilities related to your investment accounts, contact Daniel Hanifin.