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Securities & Investment Fraud Lawyers

Levin Papantonio Rafferty has successfully represented thousands of investment fraud victims in arbitration and in state and federal court. Our firm was established in 1955, and we have a team of nearly 50 attorneys and over 150 support staff.

We have received over 150 jury verdicts throughout the country in the amount of $1 million or more and achieved verdicts and settlements in excess of $40 billion. We have recovered hundreds of millions of dollars in securities and investment fraud cases.

Our team has successfully obtained numerous awards recovering all of our clients’ losses, fees, and costs. We have recovered numerous record-setting verdicts, including an award of over $19 million against UBS Financial Services relating to Puerto Rico Bonds and Closed-End Funds – the largest such arbitration award out of more than 3,500 claims filed.

Investors harmed by the recommendations of their broker or registered investment advisor may have a right to assert legal claims to recover their losses, including reimbursement of attorney’s fees and costs. Often, claims involve certain brokers or brokerage firms that recommended unsuitable products to many of their customers. We frequently handle regional or local cases surrounding similar misconduct or recommendations.

Most securities fraud claims are subject to mandatory arbitration before FINRA (the Financial Industry Regulatory Authority), which has its own set of unique procedural rules or other Arbitration forums like the AAA (American Arbitration Association) or JAMS. Our Securities and Business Litigation practice group has decades of experience handling stockbroker claims in arbitration and in state and federal courts.

We handle claims both big and small involving all types of complex securities and investments, including allegations of unsuitability, overconcentration, portfolio mismanagement, breach of fiduciary duty, excessive fees or commissions, excessive trading or churning, negligence, failure to supervise, and more.


Active Investigations and Lawsuits

stock exchange

When you trust an investment firm to maintain (and hopefully grow) your savings, you expect to receive professional and accurate information tailored to your particular circumstances.

Sometimes unscrupulous stockbrokers and investment advisors take advantage of your trust, and you can find yourself facing the loss of your life savings. Whether your loss is due to unsuitable investment advice, conflicts of interest, or investment fraud, all you know is your retirement income is gone.

Our securities and investment fraud lawyers are dedicated to helping victims recover financial losses caused by stockbroker fraud, broker misconduct, and unsuitable recommendations.


Types of Securities and Investment Fraud

Investment fraud and broker misconduct can take many forms. While claims often center on a particular broker’s misconduct or misrepresentations, in many instances, the broker or advisor is also a victim of the brokerage firm involved.

We provide free reviews of potential claims at no charge to you, and we are available to analyze your portfolio to determine if misconduct caused you to suffer losses. Below are a sample of the type of securities and investment issues we analyze and litigate every day.



Unsuitable investment recommendations by your financial advisor/broker can be considered fraud. Suitability obligations are critical to ensuring investor protection and promoting fair dealings with customers and ethical sales practices.

FINRA Rule 2111 governs general suitability obligations. FINRA Rule 2111 requires that a brokerage firm or financial advisor has a reasonable basis to believe a recommended transaction or investment strategy involving a security or securities is suitable for the customer. This is based on the information obtained through the reasonable diligence of the firm or the advisor to ascertain the customer’s investment profile.

If a brokerage firm or a financial advisor fails to perform the due diligence necessary to make a proper recommendation, then their clients may be able to recover for their losses. Brokerage firms typically require customers to sign an agreement with a mandatory arbitration provision. This limits the ability of customers to engage in traditional lawsuits. Instead, the complaints will be handled through the FINRA arbitration process, which we handle every day.



Negligent misrepresentation occurs when a financial advisor provides false information to the customer because he/she is careless or negligent. In certain cases, financial advisors are provided incomplete or incorrect information by their brokerage firm, which leads to a failure to provide the investor with proper representations.

Oftentimes, the claimed safety of the investment is the false misrepresentation. When advisors recommend an investment opportunity, they are required by state and federal law to provide you with all the relevant facts necessary to make an informed decision about whether or not to invest. The presentations of the relevant facts and the risks and rewards are required to be a balanced presentation of the relevant risks and rewards.


Alternative Investments

Alternative investments are non-traditional investments or NCIs. They are investments that are not publicly traded and are typically illiquid for a period of time or forever. Many alternative investments tend to require a minimum investment and charge higher fees and commissions than traditional investments. They also tend to be high-risk and volatile.

Alternatives can appear attractive to investors because they can offer higher returns than traditional investments. This does not mean they are suitable for most retail investors, especially retirees and unsophisticated investors, because of potential illiquidity issues and the risk of principal loss. In fact, FINRA reminded brokerage firms and advisors regarding alternatives as far back as 2003, warning that that these types of investments may be suitable for only a very narrow band of investors capable of evaluating and being financially able to bear those risks.

Losses in alternative investments can often be attributable to misrepresentations, unsuitability, breach of fiduciary duty, negligence, misappropriation, and failure to supervise by brokerage firms.


Bond Fraud and Misconduct

Bonds are debts sold by companies or government entities to investors to raise capital. They are offered by financial advisors and brokers as safe investments. But bond fraud can cost innocent investors substantial portions of their portfolios and retirement savings, and it is a problem that tends to increase amid recessions. Fixed income investments are supposed to be the cornerstone or foundation of a well-diversified portfolio. Your fixed income holdings are not supposed to be where an investor takes significant risk.

Types of Bonds

There are four general categories of bonds that are offered to investors:

  1. Corporate bonds: Bonds issued by a company to generate funds
  2. Federal bonds: Bonds sold by the federal government, such as U.S. Treasury bills (T-bills) and U.S. savings bonds
  3. Municipal bonds: Bonds issued by states, cities or other government entities to fund civic projects
  4. Agency bonds: Bonds issued by government agencies or government-sponsored enterprises; these include mortgage-backed securities such as those offered by the Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac) and the Government National Mortgage Association (GNMA, or Ginnie Mae)

There are different forms of bonds within these categories, and bonds may be purchased individually or through bond funds, in which investors buy into pools of bonds in a manner similar to mutual funds. High yield junk bonds have significantly more risk than investment grade bonds. In addition, junk bonds typically move up and down with stocks and provide little or no downside protection when the stock market is declining.

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Examples of Bond Fraud

As with any investments, there are risks associated with bonds. Unfortunately, investors are not always made aware of the potential dangers by their financial advisors. The risks vary dramatically with different kinds of bonds and with different credit ratings.

In some circumstances, investors may buy so-called junk bonds, which are high-interest, high-risk corporate bonds. Junk bonds are often sold under the guise of bond funds or referred to as high-yield funds, and financial advisors and brokers have been fined for misrepresenting or omitting material information regarding the risks of the investment and the bonds themselves.

Different types of bonds come with varying inherent pitfalls, and your financial advisor has a responsibility to disclose all known material facts associated with a bond or bond fund offering and offer investments appropriate to your risk tolerance and other individual factors. Some bonds that promise high return, for example, may also be issued by a company that is a credit risk and may default; other bonds carry a risk that the issuers may be able to pay investors at lower interest rates and a reduced return; some bond funds may have been exposed to sub-prime loans.

Another common and particularly deceptive form of financial advisor misconduct is the concealing of charges related to the bond or bond fund. Because the prevailing market prices of many bonds are not available to investors, financial advisors sometimes exploit consumers by engaging in the practice of markups and markdowns. The markup is the difference between the actual cost of a bond and the fee at which it is sold to the investor; the markdown is the hidden fee subtracted from the initial purchase cost.


Breach of Fiduciary Duty

A broker is an individual that arranges a contract between a buyer and seller in return for a commission. Brokers coordinate contracts for property that they do not possess and do not have a personal interest. The property can be real estate, mortgages, insurance, stocks, bonds, and commodities. The most common types of brokers are securities brokers, commodities brokers, real estate brokers, mortgage brokers, and insurance brokers. Regardless of a brokers’ specialty, he or she must adhere to moral and financial legalities or risk committing broker fraud.

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Wall Street has spent millions of dollars marketing its brokers as financial advisors or investment consultants. Many financial advisors provide broad investment advice regarding asset allocation and diversification. This investment advice has to be suitable to meet:

  1. the investor’s age
  2. financial objectives
  3. risk tolerance
  4. employment status

A financial advisor violates his or her fiduciary duty to a client and acts against the client’s wishes or best interest if the advice or recommendation provided does not meet the investor’s specific needs.


Churning and Excessive Trading

Churning in stock accounts is a form of investment fraud that involves the excessive transaction of your investment account's securities by your broker without regard for your financial objectives in order to generate commissions.

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Though profitable for unethical financial professionals, churning is costly to investors and can devastate your life savings. Churning involves the regular turnover, purchases and sales of securities, in your portfolio to generate commissions. The broker-dealer is supposed to be supervising the trading activity of the financial advisor to identify actively traded accounts. For example, brokers who churn may sell successful investments (typically stocks and mutual funds) for a marginal profit to create the illusion that an investment portfolio is performing well while simultaneously weighing it down with stagnant or failing securities and depleting it with unfair commissions. Profitability is not a defense to churning a portfolio, however. If it were, a financial advisor could churn with impunity up to the gains of the portfolio. The Financial Industry Regulatory Authority (FINRA) prohibits the practice of churning and provides a securities arbitration process through which investors can seek to recover losses and illicit commissions.

A successful churning claim requires proving that your broker had control, or de-facto control of your investment account transactions and conducted transactions that were excessive in relation to your investment objectives, resources and risk tolerance and without regard for your best interests. Churning in stock accounts can be established using various methods, including calculations that can help determine whether a broker's transactions meet the definition of excessive. These calculations include assessing the commission-to-equity ratio and turnover rate of securities in your investment account.


Failure to Supervise

Investment firms have a responsibility to establish and maintain rules regarding the supervision of their registered financial advisors and brokers. The supervision includes regular reviews of your portfolio to ensure it meets your investment objectives and risk tolerance. Broker-dealers are required to contact you in response to red flags to ensure you understand the risks involved with your holdings or trading strategy. If your investments lost money due to a representative's negligent or fraudulent behavior and the firm's failure to supervise played a role, our lawyers may be able to help you recover your losses.

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Oversight of Financial Advisors and Brokers

Investment firms have a legal obligation to ensure that their agents adhere to various federal guidelines and securities industry regulations. The Financial Industry Regulatory Authority (FINRA), an agency overseen by the U.S. Securities and Exchange Commission (SEC), requires member investment firms to implement supervisory systems for registered representatives and their financial offerings. Because many large investment agencies operate satellite branches that may lack adequate supervision and because smaller investment firms may be acquired by and absorbed into larger ones with minimal oversight in the transition, there is often opportunity for a financial advisor's negligent or fraudulent behavior to adversely impact investors.

Failure to Supervise and Investor Losses

There are a number of circumstances in which investor losses may be the result of an investment firm's negligence in the supervision of its authorized financial advisors, brokers and other investment professionals. These factors often relate to the duty of investment firms to provide adequate oversight regarding their agents' daily job functions and include:

  1. Failure to conduct appropriate reviews of financial advisor transactions, commission reports, customer accounts, and other records
  2. Failure to adequately supervise communications and material facts regarding investment products
  3. Failure to properly train financial advisors
  4. Failure to employ licensed brokers or registered investment advisors
  5. Failure to fairly and thoroughly investigate investor complaints

Securities loss claims that involve the failure to supervise often entail misconduct including:

  1. The misrepresentation or omission of information about an investment
  2. Churning, in which a broker executes excessive trades from a customer's account for personal financial gain
  3. Financial advisor or broker engaged in selling away from the firm

Ignorance of an investment professional's negligent or fraudulent behavior does not excuse investment firms from accountability. With the help of a knowledgeable lawyer, investors can pursue the recovery of their losses.


Investment Fraud and Misconduct

Many investors fall prey to the unethical practices of brokers who put their own interests above those of their clients. Common fraudulent investment products and scams include:

  1. Non-Traded Real Estate Investment Trusts (REITs): investors in non-traded REITs must rely on disclosures made by the sponsor of the REIT while paying high commissions. These investments are illiquid, expense, and often underperform compared to REITs traded on an open exchange.
  2. Junk Bonds: junk bonds are rated below investment grade by S&P and Moody’s. They carry a high risk of default and are not suitable for investors seeking stable investments.
  3. Ponzi Schemes: these schemes promise high returns, but use money from new investors to pay earlier investors.
  4. Structured Notes: a hybrid security product that generally includes a stock or bond plus a derivative. They may include hidden costs and are often riskier than promised to investors.
  5. Variable annuities: investors pay high commissions and costs for these products with high penalties for liquidating. They are often not suitable for the elderly investors to whom they are recommended.

Margin Trading

Margin trading is a practice in which a financial advisor recommends an investor purchase stocks by borrowing money from a broker-dealer using securities that are already owned as collateral. Brokers sometimes recommend margin accounts as a way to generate commissions without an additional up-front investment from their customers, despite the fact that margin trading is a high-risk strategy that is not in the best interests of many investors.

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Financial advisors and brokers have an obligation to make investment recommendations that are consistent with an investor's financial objectives, risk tolerance, income level and other factors.When recommending margin accounts, financial advisors must make investors aware of the associated risks and receive written client consent prior to establishing margin accounts and engaging in margin trading. Investors should receive a margin disclosure statement that defines the terms of the margin account, including the interest charges linked to borrowing money for the margin account.

If your financial advisor or broker recommended a margin account that was inappropriate for your established circumstances and investment goals, or improperly used the margin account as a line of credit or to purchase unstable securities, he or she may have committed a breach of fiduciary duty and you may be able to pursue losses incurred as a result.

Margin Trading Risks

Margin accounts may be sold to investors as a means of increasing their buying power to own more stock without full, immediate payment. Margin accounts are especially high risk for average investors seeking to build portfolios for retirement. Investors may suffer significant losses even in legitimate, consensual margin trading, although customers who agree to margin accounts are often not made fully aware of the risks. If the equity level of a margin account falls below the investment firm's maintenance margin requirements (the amount an investor's account must maintain after margin trades) the broker can sell securities without contacting or obtaining permission from the investor to cover the difference. Brokers may also charge commissions on the sale of these securities to compensate for the deficit, further depleting investors' resources.

Some financial advisors and brokers also make improper use of margin accounts to purchase speculative or volatile stocks, or tread margin accounts as lines of credit. Because of the complexities of margin accounts and the regulations that bind them, securities arbitration claims related to margin trading can be challenging for investors without the help of an attorney with extensive experience in cases related to investment malpractice.


Broker Misrepresentation or Omissions

The fundamental principle of both federal and state securities laws is complete disclosure of material risks and conflicts of interests. Many investors rely on information and recommendations from their financial advisors or brokers before approving securities transactions. The misrepresentation or omission of material information regarding an investment that results in losses may be considered a breach of fiduciary duty, and victims of this form of investment fraud may be able to recover their losses.

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Financial advisors and brokers have an obligation to fairly disclose all known material facts related to an investment. Material facts encompass information a reasonable person would consider important in deciding whether to sell or purchase a security. Material facts include but are not limited to the disclosure of all fees linked to the investment, as well as known risks associated with the security being recommended or sold. Inaccurate or incomplete information can put investors at risk, and financial advisors and broker-dealers who misrepresent or omit material facts about an investment may be held accountable for resulting losses.

The misrepresentation or omission of investment information by a financial advisor or broker may be an intentional act of fraud or due to negligence. Some unscrupulous advisors and brokers may provide investors with unrealistic expectations for investments or base their recommendation of a security or strategy on an inaccurate risk assessment; others may not perform adequate diligence in researching and disclosing available material facts.

Establishing Misrepresentation or Omission

Under rules established by the Financial Industry Regulatory Authority (FINRA), a self-regulatory organization that operates under oversight from the U.S. Securities and Exchange Commission (SEC) and state securities laws, losses attributed to a financial advisor's or broker's misrepresentation or omission of material facts may result in a securities arbitration claim for damages. In order to recover compensation for losses stemming from the misrepresentation or omission of material facts about an investment, an investor must establish details including:

  1. The investor relied on the recommendation of a financial advisor or broker
  2. The advisor or broker owed an obligation to the investor to disclose the material facts in question
  3. The misrepresentation or omission of information related to an investment was negligent
  4. The investment resulted in financial loss

Overconcentration of Assets

One of the fundamental principles of investing is the diversification of funds across different asset classes and market sectors to minimize the risk for losses without sacrificing returns. Often, concentrated portfolios are not easy to identify because the portfolio may have several mutual funds or dozens of holdings. Registered brokers and financial advisors have an obligation to know certain essential facts about individual investors in order to make appropriate recommendations and provide investors with the information they need to make informed decisions. These details include an investor's age, investment risk tolerance and financial status.

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FINRA requires the broker-dealer to perform what is known as a customer-specific suitability analysis before any recommendations are made. All recommendations and investment advice, including trading strategies, must be in an investor's best interest and suitable for their investment objectives. If a financial professional or broker-dealer is fraudulent or negligent in recommending or allocating an overconcentration of assets that is inappropriate for your investment goals, income level, financial obligations and other individual factors, they may be held accountable for any losses you incurred.

Failure to Diversify Investment Portfolio

Although each investor is unique, financial advisors and brokers have an obligation to recommend a well-diversified portfolio. Asset allocation, diversification through stocks, bonds, and cash, can reduce risk without sacrificing returns. Each asset class behaves differently. For examples, stocks typically move up when bonds are down. This is known as inverse correlation. FINRA and the SEC believe asset allocation and diversification are critical and vital to building a well-constructed portfolio. Studies have found that asset allocation explains more than 90% of a portfolio's performance.

Surprising to many investors is the fact that stock selection and market timing account for very little of a portfolio's performance. The reason is because no one knows when the market or specific stocks are going to go up or down. This is commonly known as the random walk. The costs associated with getting in and out of positions when trying to time the market eat up whatever benefit was gained from the trades. Of course, the broker-dealer and your financial advisor make money on every security traded.

A balanced investment portfolio consists of a diversification of securities throughout different asset types such as stocks, bonds and cash, as well as multiple industry sectors such as technology, medical and energy in accordance with your individual circumstances and financial goals. Like asset classes, the industry sectors do not move up and down in tandem. Having each industry sector in your portfolio in the right increments can reduce risk without sacrificing returns. Whether through intentional deception or carelessness in protecting your best interests, advisors and brokers sometimes fail to recommend appropriate diversification of securities or advise investors to disproportionately concentrate their funds in a single asset class, sector or company. When these acts, through negligent management or malpractice by a broker or advisor, result in failure to diversify on behalf of an innocent investor and losses occur, the investor may be entitled to seek damages.


Preferred Securities

In times of market crisis, similar to what we are now experiencing, most preferred securities act more like common stock than fixed income.  As a result, preferred securities miss the upward price appreciation that common stocks enjoy but are exposed to the downward declines.  These investments that are traditionally thought of as income-producing vehicles have lost significant value, performing far below their income generating alternatives.

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Preferred stocks are traditionally marketed to risk-averse and income-seeking investors.  The driving appeal of preferred stocks is the return from dividend payments.  However, many preferred shares are callable, meaning that the issuing company can repurchase the shares at par value and pay no further dividends.  If interest rates fall then companies have an incentive to call the security so preferred shares carry an inherent interest rate risk.  Other risks are associated with the credit of the issuer, the potential for overconcentration in specific industries, and lower liquidity than common stock.

The $200 billion preferred stock industry has significant industry sector concentration risks.  Companies can carry preferred stocks as equity on balance sheets so many regulated entities, such as insurance and financial institutions, choose to issue preferred stock instead of traditional debt.  Nearly 72% of all preferred stocks come from the banking industry, insurance industry, or other financial service industry.  Only a carefully constructed preferred stock portfolio can avoid the associated concentration risk.

Preferred stocks are a hybrid of debt and equity investments.  Like traditional debt, preferred stocks carry preference over common stock for dividend payments and bankruptcy proceedings.  Also like debt investments, preferred shares offer a fixed dividend payment similar to bonds.  However, like equity, preferred stock can fluctuate in value, especially when the value of the issuing firm is low.  Preferred stocks are given ratings similar to bond ratings but preferred ratings are almost always lower than bond ratings because preferred securities do not have the same guarantees for interest payments.

Investors holding preferred securities in their portfolios may have noticed drops in the investment values.  If your financial advisor recommended a portfolio concentrated with preferred securities and your portfolio has incurred damages, you may be able to recover your losses.


REIT Issues

A REIT is an entity that owns and operates income-producing real estate and distributes the income to investors. REITs pool the capital of numerous investors to purchase a portfolio of properties which the typical investor might not be able to buy individually. To qualify as a REIT, a company must have most of its assets and income tied to a real estate investment and must distribute at least 90% of its taxable income to shareholders annually in the form of dividends. Investors depend on the sale of properties or listing for the return of their principal.

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Most REIT shares are registered for trading on a national securities exchange. Publicly traded REIT shares are widely followed by securities analysts. Their share prices fluctuate with changes in the REIT's portfolio and economic conditions. Other REITs are referred to as non-traded REITs, as their shares are not registered for trading on any exchange. Investors in non-traded REITs who seek to sell their shares before the term of the investment must either resell their shares to the sponsor or sell in an inefficient secondary market, usually at severe discounts. Because non-traded REIT shares do not trade in an open market and are rarely the subject of analyst reports, investors depend on the disclosures made by the sponsor for information about the value of the REIT's shares. Non-traded REITS are typicaly illiquid, expensive, and underperform their traded counterparts. Non-traded REITs often pay 10% or more in commission to the salesmen and charge ongoing marketing expenses as high as 2-3%. As a result, the non-traded REIT will have to return as much as 12-13% to simply break even.

Under FINRA Rules, brokerage firms have an obligation to make only suitable recommendations and to fully disclose all risks associated with a recommended product, including the fact that REITs are illiquid products. Moreover, brokerage firms have a duty to conduct a reasonable investigation of the issuer and the securities they recommend before approving them for sale to their customers. In October 2011, FINRA issued an investor alert about public non-traded REITs, urging investors to perform a careful review before investing. The alert states that FINRA is issuing this alert to inform investors of the features and risks of publicly registered non-exchange traded REITs. If you are considering a publicly registered non-exchange traded REIT, be prepared to ask questions about the benefits, risks, features and fees. FINRA further advised investors to: “[b]e wary of pitches or sales literature offering simplistic reasons to buy a REIT investment. Sales pitches might play up high yields and stability while glossing over the product’s lack of liquidity, fees and other risks.”

Investors purchasing REIT securities often were unaware of the risks and illiquidity associated with those securities, and sometimes were misled into believing that non-traded REITs are a safe, income-producing investment similar to high-quality fixed-income securities. In some cases, an investor's REIT may have little to no value as the REIT has filed for bankruptcy protection. In other instances, an investor is unable to access the money placed in a REIT because of the illiquidity of the product. In either case, our law firm represents investors against the brokerage firms who recommended that they purchase REITs, and files claims to recover losses sustained and/or recession of the investment in the REIT. In many instances, an investor can maintain real estate exposure in well-diversified, low-cost, publically traded mutual funds, like Vanguard, with better performance.


Selling Away

Selling away occurs when a broker or other registered financial advisor sells or solicits the sale of private securities not approved by the investment firm for which he or she works. Selling away is a breach of fiduciary duty that often results in substantial losses for innocent investors.

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Selling away entails the sale of private securities that are not authorized by and not on the products list of a registered broker's or financial advisor's broker-dealer firm. Broker-dealers, however, are responsible for the outside business conducted by its financial advisors whether it approved it or not. Broker-dealers' supervisory responsibilities are extremely broad.

The securities frequently sold, but not approved by the broker-dealers may include the following:

  1. Investments in privately held companies
  2. Promissory notes
  3. Real estate
  4. Tenants in common (TIC)
  5. Real estate investment trusts (REITs)
  6. Limited partnerships

Brokers sometimes sell away to avoid the scrutiny of their broker-dealers over questionable investments in which they place their own interests before those of their investors. Cases involving selling away often involve a broker who sold investment products in which he or she was paid an undisclosed commission or otherwise had a personal interest in. Because selling away is conducted without the authorization of or disclosure to a broker's investment firm, the securities involved do not benefit from the broker-dealer's due diligence. In circumstances in which selling away occurs, investors are typically unaware of the risks associated with the securities purchased. The financial advisor frequently receives as much as 10-15% in commissions for the types of securities that are sold away from the firm.

Selling away is not only unethical, it is a violation of Financial Industry Regulatory Authority (FINRA) rules. Investors who suffered losses due to a registered broker selling away may be able to seek damages through securities arbitration against the broker-dealer of the investment advisor who recommended the security. FINRA has regulations that restrict the external or outside business activities of registered brokers and financial advisors, including the transactions of private securities. FINRA defines private securities transactions as any securities transaction outside the regular course or scope of an associated person's employment with a registered broker-dealer firm.

If a broker wishes to sell securities outside of an investment firm's approved products list, he or she must provide the firm with written notice prior to participating in a private securities transaction; the broker-dealer may then decide whether to approve the sale or solicitation of the securities in question. Regardless of whether the broker-dealer approves the security or not, it assumes the responsibility for transaction oversight as if it was executed on behalf of the firm.

Selling away often stems from registered brokers who work in satellite offices for larger investment firms and have little oversight from or contact with their principal management. Although brokerage firms may not know that their agents are selling away, investment firms may be held liable for investor losses if it can be established that the broker-dealer should have known about a broker's outside sales activities, lacked reasonable supervisory policies to prevent and detect broker misconduct, or otherwise failed to act in the best interests of its investors.


Unauthorized Trading

Unauthorized trading is a common form of investment fraud in which a financial advisor or broker makes transactions via your nondiscretionary investment account without your explicit permission. Unauthorized trading often involves the practice of churning, in which a broker engages in an excessive level of transactions through a customer's account. This generates substantial commissions for financial advisors and brokers, but it also costs investors.

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Most investors maintain nondiscretionary accounts with their investment firms. In a nondiscretionary approach, your financial advisor or broker may make investment recommendations but may not make transactions linked to your investments without your consent. Other investors choose to have discretionary investment accounts, which are managed by a financial advisor or broker who is authorized in writing by the investor to make decisions regarding the purchase or sale of securities. Financial managers of discretionary accounts still have a fiduciary duty to act in the best interests of and according to the investment goals and risk tolerance of their investors.


Variable Annuity Issues

Variable annuities are often recommended by investment advisors and brokers as a secure element of your retirement plan. Yet they are not suitable for many consumers, particularly elderly investors, and are sometimes sold against clients' best interests. Annuities pay some of the highest commissions in the securities markets, the annual costs can exceed 3%, and there are very high penalties for liquidating.

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Variable Annuities and Broker Commissions

Though inappropriate for most investors, financial advisors and brokers sometimes recommend variable annuities because they pay higher commissions for the investment required than other (and more fitting) securities. In order to sell variable annuities, brokers may misrepresent or omit information regarding an annuity's costs (which are some of the highest in the industry), risks or propose an annuity despite a conflict. The investor's age, risk tolerance and investment objectives frequently make an annuity unsuitable. Financial advisors may also recommend the unnecessary exchange of existing annuities to generate additional commissions.

Many investors, for example, are not made aware that variable annuities have long holding periods that may commit their money long-term and are very expensive. While any gains in variable annuities are tax-deferred, variable annuities are also subject to the market and come with high surrender charges for early withdrawal as well as other penalties.

The Complexity of Variable Annuities

Financial advisors and brokers who sell variable annuities often imply that, as insurance products, they are safe investments. They may push the so-called benefits of variable annuities: tax-deferred gains, death benefits to your beneficiary, life insurance coverage, regular payments. In many cases, however, investors do not need these benefits and the costs are unwarranted.

The penalties are often disguised in complex agreement language or through deceitful sales tactics. Variable annuities are particularly poor investments for the elderly as well as investors who need access to money from their investments, have adequate life insurance coverage without an annuity, already have their money in a qualified account, do not need the expense of a death benefit, have short-term investment goals, or have low-risk tolerance among other factors.

Arbitration v. Mediation

Arbitration and mediation are two distinct ways of resolving securities disputes between and among investors, brokerage firms, and individual brokers. Mediation and arbitration are both forms of “Alternative Dispute Resolution” that may offer a prompt and inexpensive way of resolving disputes.

Investors can file an arbitration claim through FINRA (or another arbitration forum) when they have a dispute involving their brokerage firm or financial advisor. Nearly all brokerage firms require clients to sign arbitration agreements that limit investors’ rights to file claims in court. Most arbitration disputes are resolved through settlement, often through conducting a mediation with a neutral mediator to aid in the negotiation of the claim.

If you want to recover damages or losses, filing an arbitration case offers you a way to seek recovery.

Why Choose Our Law Firm
  1. We have recovered over $500 million in securities and investment fraud cases
  2. We have represented over 4,000 individual investment fraud victims
  3. We have represented over 1,500 state, municipal, and institutional entities
  4. Our attorneys include the former President and a current Director of the National Securities Bar (PIABA)
  5. We have successfully recovered full awards in arbitration for numerous clients, including awards of well-managed damages, attorney’s fees, and costs.
  6. We have been appointed and served in leadership roles in more than seventy Multi-District Litigations (MDLs) around the country, including the In re National Prescription Opiate Litigation MDL, which has been called “the largest and most complex case in the history of jurisprudence” by the Washington Post.
  7. We work on a contingency fee basis, meaning we charge no upfront costs and no fees unless we first make a recovery for you.
Our Fees & Costs

Our lawyers provide free confidential case evaluations, and we never charge any fees or costs unless you first recover.

The contingency fee we charge ranges from 20% to 40%. The amount we charge is based on how much we recover for you. To review a summary of our fees and costs, click Fees & Costs.

Free Case Evaluation

To contact us for a free confidential consult, you can call us at (800) 277-1193. You also can request a free private and confidential evaluation by clicking Free & Confidential Consult. Your inquiry will be immediately reviewed by one of our attorneys who handles securities litigation.

What Our Clients Say

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Below are some of the emails and letters that our clients have sent us.

At a time in our life when we were most vulnerable we lost control of our finances. We fell victim to a broker that took huge commissions and did not disclose that we were not able to access our money. Peter Mougey and his wonderful staff worked with us to make us whole again and got our money released. I cannot say enough about their work ethic, professionalism, and kindness during this stressful time for us. We had a 100% positive conclusion to our case and we strongly recommend Peter and the firm. We can now sleep at night! Fred & Pat H.

My husband and I were very pleased with the work that Peter and his team provided. He was very knowledgeable of the circumstances of our case and kept us informed throughout the process. He is extremely qualified and worked diligently on our behalf. We are positive that this case would not have been resolved in our favor had it not been for Peter's expertise and his passion. He definitely cares about his clients and we sincerely appreciate his efforts. Rachel C.

FRS is a governmental body. FRS retained the services of Peter Mougey of the LP law firm in a multimillion dollar lawsuit involving extremely complex issues. Mr. Mougey quickly mastered the issues and gave advice that was vital in bringing about a successful resolution. Two of the most important features of Mr. Mougey’s representation was his understanding of government and his ability to communicate complicated legal concepts to a 10-member board of trustees in language that was easily understood by all. I did not know Mr. Mougey before FRS retained him and, fortunately, have not experienced circumstances where the system would need his services again. However, if needed, I would have no hesitation in retaining his services again. Please let me know if you need any additional information or assistance. Steven S.

Edison's famous adage can't ever be ignored of course: 1 part inspiration and 99 parts perspiration. However the two attitudes must be present indissolubly--both are essential--if results are to be obtained. Peter Mougey’s group is aware of such a requirement, they work very hard at the latter, and the former comes easily to them, a rare combination anywhere to be found indeed. Raphael B.

I would like to express my sincere gratitude to Peter Mougey and your entire team on behalf of my family for the amazing job done during your representation. From day one I received kindness, rapid responses to all of my questions, with polite and patient encounters with all of your staff assistants. You are the best- and I will be eternally grateful to you and your entire team. Michelle E.

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