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Investor Rights


A broker may not recommend a security unless he or she has reason to believe that it is suitable to the investor. When a broker crafts an inappropriate investment strategy or the investor inappropriate financial products, the investor has a claim for unsuitability. An investment that does not meet the objectives and means of an investor may also be unsuitable.

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Broker Churning

Sometimes brokers abuse client confidence for personal gain through commission. Churning occurs where a broker unjustifiably gains from entering into transactions to generate excessive commissions. Where this occurs, investors are entitled to recompense from their broker and brokerage firm.

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Reverse Churning

Reverse churning occurs when a broker inappropriately charges the investor a fee to maintain a fee based advisory account. Typically, the fee is expressed as an annual percentage charged to the entire account balance. Reverse churning is becoming more common as brokerage firms search for new methods of generating profit from accounts that would otherwise not produce revenue.

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Breach of Fiduciary Duty

Your broker, financial advisor, and brokerage firm all must act in your interest. Although they are experts in their field, they are legally required to exercise their expertise and judgment in a manner that most benefits you. This relationship is legally known as a fiduciary duty. A legal claim arises where a fiduciary breaches their legal duty, and the client suffers damages.
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Failure to Supervise

Brokerage firms must supervise their brokers’ conduct and recommendations to clients. The firm must ensure compliance with FINRA and security industry rules. Where a broker breaks the law, or is negligent, and the investor suffers losses, the brokerage firm is liable.

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Other Broker Fraud Claims

Stock broker fraud occurs when a stock broker does not act in the client’s best interest. Broker fraud occurs when stock brokers put their financial interests before the investor’s interest, and violates the fiduciary relationship. Continue reading to learn about some of the common forms of broker fraud.

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Astanehe Law Knows Your Rights

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