While many individuals who reside in the state of Kentucky may have the money to invest, having the knowledge to do it in a manner that is fruitful is another story. As a result, it is not uncommon for investors to turn to brokers for assistance. Though in many situations these brokers act appropriately resulting in a profit, on occasion their behavior is anything but appropriate. There are multiple things that could be a sign that the latter is occurring.
The first is that you learn you are suffering sudden losses. These losses could be the result of omissions and misrepresentations made by your broker such as being told that an investment is not risky. Along those same lines, failing to provide negative information regarding how a company has been performing could also lead to these losses occurring.
A second sign that your broker is acting inappropriately is when he or she is engaging in the unauthorized use of margin. This is essentially your broker borrowing money from the brokerage firm to invest on your behalf. This can be an issue for the investor since interest must be paid on any money owed.
Next, a broker must not open an account without authorization from an investor. Among others, these include margin or option accounts. It is possible that such an account could be the result of forgery. In the alternative it could be the result of broker misrepresentations. Likewise, all trading must be authorized. Not only can a stockbroker not sell or purchase securities without permission, when permission is granted to engage in the activity it can only be for the amount specified.
Churning is another red flag to look for. Essentially entering into trades so that commissions can be collected by the broker, we wrote about the illegal activity in a previous post. The collection of these commissions could cut into the profits.
Last, investment recommendations provided by a broker should be appropriate based upon the appetite for risk, goals and needs previously discussed. If they are unsuitable, it could signal that your broker is acting in an improper manner.
If you have questions regarding whether your broker is engaging in inappropriate behavior a lawyer may be of assistance. For more information regarding the matter please see our website.