Financial Advisors, Securities Fraud, and Malpractice: What You Need to Know

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We entrust financial advisors with an asset even more precious than money: the security of our future. They are responsible for ensuring that money is well-managed and well-protected – so what happens if they neglect that duty? 

State and federal laws mandate that financial advisors and stockbrokers have a duty to act in the investor’s best interest. If an investor suffers losses due to malpractice, they have the right to be compensated.

What is Investment Advisor Liability?

It’s important to state that just because you lose money on an investment doesn’t mean malpractice occurred. The plaintiff and their attorney need to show that the advisor wasn’t acting in the plaintiff’s best interest, which can mean:

  • Unauthorized or excessive trading
  • Unsuitable investments
  • Negligence
  • Churning
  • Violations of securities laws 
  • Investment fraud
  • Breach of fiduciary duty
  • Selling away

Securities fraud can also constitute financial malpractice. Securities fraud covers a wide range of activities that essentially mean the advisor misrepresented or omitted material information during the course of purchasing or selling securities. Past cases have involved Ponzi and pyramid schemes, falsifying documents, manipulating share prices, and more. 

Obtaining compensation in these cases is difficult and complex. An experienced attorney can help you build your case and collect the necessary evidence to prove that a financial advisor committed malpractice.

What is a Fiduciary? 

Registered investment advisors (RIAs) are held to a fiduciary standard, meaning they must perform their actions for the benefit of the investor, not themselves or anyone else. Retirement advisors are also held to a fiduciary standard. If an investor thinks their advisor has not lived up to the fiduciary standard, the next step is often getting an attorney involved.

These types of claims are often multi-faceted, sometimes involving fraud allegations as well. Proving fiduciary malpractice often involves:

  1. Demonstrated evidence of a fiduciary relationship (for example – the advisor was hired to handle your finances or investments)
  2. The advisor breached that duty by putting other interests ahead of yours
  3. You suffered financial harm as a result of that breach

Some of the questions below can help you start identifying potential issues with your financial advisor. 

  • Am I aware of and comfortable with the commission fees on my accounts?
  • Is my investing strategy appropriate for my age, and has it evolved as I’ve gotten older?
  • Are my investments properly diversified?
  • Has there been higher-than-average trading on my accounts?
  • Any trade must be designated as “solicited” (recommended by your broker) or “unsolicited” (initiated by the client) – are my trades properly designated?

If you’re unsure about the answers to these questions, take a closer look at your accounts and communication from your advisor. While we rely on advisors for their expertise and insight, your money and your future should never be taken lightly. You have every right to know exactly what’s going on with your financial accounts. 

How to Start Legal Action Against a Financial Advisor

The first step: talk to a knowledgeable attorney who has experience with financial malpractice. These cases are in-depth, complicated matters that require a knowledgeable lawyer who has pursued similar claims in the past.

Once you and your attorney decide that evidence exists to support claims of financial advisor malpractice, you’ll need to start gathering communication, bank statements, and more. Your lawyer will help you through the process of what information you need to provide.

If you have questions about your situation, contact McGonigle Law today. Our team has handled many of these cases and we are available to discuss your questions and concerns.



The information contained herein is for general purposes only and does not constitute legal advice.


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