Stock Fraud
Every day there are new entrants to the ever growing crowd of stock market investors. Some of these investors will run with the bulls, some will fight with the bears and unfortunately some will fall prey to stock fraud.
Stock fraud occurs when a stock broker manipulates customers into trading stocks without regard for the customer’s interests. All forms of stock broker fraud are designed to violate the investor/broker trust. The key principle of stock fraud is that the investor’s interests are secondary to the financial gain a broker can obtain.
When selecting a stock broker, do your home work. Don’t be afraid to ask questions of any potential stock broker so you can create an effective comparison of their services, level of expertise, years of experience, and fee structure. Be sure and ask about the firm’s and the stock brokers license. If you are new to investing it is a good idea to stick with name brand firms, whether online or full-service. Additionally, there are numerous online resources to help you choose and use the best stock broker for you including: Broker evaluation, Broker Rankings and Investor Guide Broker Rankings. Another helpful resource may be a survey of brokers that was published by Smartmoney.com. This survey is an excellent overview of the best brokers.
If for some reason you suspect that a stock broker has committed fraud and thereby caused you to suffer investment loss, you may wish to contact an attorney familiar with stock fraud law. A good stock fraud lawyer can help you determine if you have a potential stock fraud claim that would enable you to recover financial losses. Several stock fraud lawyers can be through online directories such as Online Lawyer Source.
Generally, broker fraud occurs under four circumstances. Stock fraud is committed when a stock broker:
- misrepresents, misleads or omits material facts (especially risk factors) regarding a specific stock;
- recommends stocks outside the client's risk tolerance--pushes undesirable stocks, often resulting in losses much higher than the client can bear;
- intentionally fails to diversify a client's portfolio (a practice known as over concentration) and does not attempt to protect a client assets;
- practices churning wherein the broker creates additional fees by conducting large numbers of transactions, such as selling stocks with small gains in order to show profits.
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