Financial Sector Investigations

Recent volatility in the financial markets have caused several investment banks, insurance companies, and government sponsored enterprises, such as Fannie Mae, Freddie Mac, Merrill Lynch, Bear Stearns, and AIG, to come to the brink of destruction before government bailouts. Similarly, Lehman Brothers was recently forced into bankruptcy. Investors holding securities involving the financial sector, including common stock, preferred stock, and fixed income, suffered significant declines in the security’s value.

FINRA (f/k/a NASD), the Financial Industry Regulatory Authority, requires financial advisers to make suitable, or appropriate, recommendations to their customers. These recommendations should be based on an individual’s risk tolerance, investment objectives, and financial situation. The “know your customer” rules require financial advisors to diversify an investor’s portfolio across multiple industry sectors. Diversification across multiple sectors reduces volatility and prevents significant losses due to concentration in one sector of the economy. Portfolios that were exposed to the financial sector without adequate diversification have experienced unwarranted losses.

Financial Advisors who have recommended unsuitable concentration in the financial sector have caused unnecessary financial loss in their clients’ portfolios. The recommendation and sale of unsuitable investments constitutes securities fraud and, if it caused a financial loss, may be the basis for a securities fraud claim. Levin, Papantonio, Thomas, Mitchell, Rafferty, & Proctor is currently accepting securities fraud claims due to concentrated positions in the financial sector. If your investments lost significant value due to concentrated exposure in the financial sector, contact Peter Mougey for a free consultation.