Unsuitable Investments

Securities Fraud Lawyers Assisting Residents of Texas

Financial advisers owe their clients a fiduciary duty. Among other things, this means promising to put their clients’ interests above their own. Stockbrokers who recommend and sell investments that are unsuitable for a particular client may have broken this promise or violated other laws. If you were burned by your broker in Texas, the securities fraud lawyers at Ajamie LLP may be able to help you pursue reimbursement for the money that you lost.

How the Fiduciary Duties of Brokers Protect Clients from Unsuitable Investments

A broker who recommends unsuitable investments to his or her clients may have violated a number of principles that regulate broker behavior.  Texas brokers owe a fiduciary duty to their clients to properly execute orders. Investment advisers may owe even greater duties to their clients. This means that when recommending a particular investment to a client, a financial adviser must put the client’s interests first. Abiding by the fiduciary duty therefore requires an adviser to know the client’s financial situation, tolerance for risk, investment goals, and other details. Failure to understand a client’s situation could constitute a breach of this duty.  A financial adviser who recommends an unsuitable investment because it would benefit him or her through higher fees or commissions has likely breached the fiduciary duty.

Brokers who recommend unsuitable investments to their clients also may be liable under a theory of negligence if the recommendation was simply a result of the broker’s failure to perform due diligence. As investment advisers need to disclose all material facts to their clients, not disclosing the lack of due diligence may also be a breach of their fiduciary duty. Brokers also sometimes recommend unsuitable investments under circumstances that constitute fraud or misrepresentation. In many cases, an action brought by an investor against a broker who recommended unsuitable investments will allege all or some combination of breach of fiduciary duty, fraud, negligence, and misrepresentation claims.

The Financial Industry Regulatory Authority (FINRA), under authority granted by the Securities and Exchange Commission (SEC), promulgated a similar rule that went into effect in 2012. FINRA Rule 2111 requires brokers to have a reasonable basis to believe that a recommended investment is suitable for a given client, based on a number of factors, including the investor’s age, risk tolerance, and financial situation.

Investors whose brokers have violated either of these rules may have several available remedies, from a traditional negligence or fraud lawsuit to arbitration. A knowledgeable attorney can help you understand your options if you are in this situation.

Contact an Experienced Texas Lawyer to Discuss an Investment Fraud Claim

Experience can be critical when taking on an unscrupulous or negligent financial adviser. For decades years, the lawyers at Ajamie LLP have assisted investors from Harris County and throughout Texas, including Houston, Conroe and Sugar Land. To schedule a free case evaluation with an experienced securities lawyers, call 713-860-1600 or email info@ajamie.com.