What it sounds like:
“My broker told me there was no way I could lose money on this investment.” “My broker told me this was a “low risk” investment.” “My broker failed to tell me about any of the risks of this investment.” “My broker told me that my returns were guaranteed.”
Your stockbroker or financial advisor cannot lie, misrepresent or fail to disclose the risks of any investment. Such conduct is a violation of state and federal securities laws, as well as the rules and regulations of the SEC and FINRA. A broker must fairly disclose all material risks to their client, and cannot misrepresent or downplay those risks. Misrepresentations and omissions often hide the risks associated with a particular investment, and lull the investor into a false sense of security. A brokerage firm or broker can be held liable if the firm or broker misrepresented material facts or omitted to disclose material facts to the investor regarding an investment.
Often, the broker or brokerage firm will waive a thick document, such as a prospectus, at you as if it is a get-out-of-jail-free card. Kantas calls this the “you should have caught us defense”. Your broker and his firm cannot hide behind “boilerplate” documents, such as a prospectus or other written disclosures, to justify their verbal misrepresentations or omissions. In many cases, the broker or financial advisor will have made representations that were either patently false, or that seriously distorted the true risk of a particular investment. Often, a stockbroker will make statements that are contrary to the prospectus or other written document. It is often the case that the broker has not even read the prospectus! A seller of securities cannot knowingly or inadvertently misrepresent the important features of an investment. As an investor, you have the right to rely on the statements and promises of your investment professional.
If your broker or investment advisor misrepresented or omitted to disclose the risks of your investments, you may be able to recover your losses. Contact us today for a free consultation.