Break Point Selling

There are many different ways that your broker or brokerage firm can take advantage of you for their own financial gain, or make mistakes that result in serious financial losses for you. Finding out that your broker failed to provide the professional and experienced guidance that you expected can be devastating, especially when it results in substantial financial losses for your family and you. Fortunately, California allows investors who were burned by their brokers to bring a negligence action to recover the compensation that they are due from their broker or firm. One common way that investors find themselves in financial peril as a result of broker misconduct is breakpoint selling. This action relates to mutual funds and the commission discounts applied to the investment. Los Angeles securities fraud lawyer Steve A. Buchwalter is prepared to provide you with the seasoned legal counsel that you need during this difficult time.

The majority of mutual funds provide a commission discount that depends on the amount of each investment. The point at which an investment will trigger a different commission discount is called a breakpoint. As an example, if an investor requested a purchase of $24,999, this could yield a 5% commission. If the purchase were only one dollar more, however, the commission might be reduced to 4.5%. It is also not required that the investment be made in the same fund. If a fund family provides for a high cap fund and a low cap fund, for example, the commission would be applied if $12,500 were invested in each fund. In some cases, fund families will provide the benefit of a breakpoint discount if you accept an arrangement under which the investment is made over a period of time, usually consisting of 13 months.

Brokers use breakpoint selling to manipulate their clients’ accounts by manipulating investments to achieve certain commissions at each breakpoint. To maximize their commission, a Los Angeles broker may recommend making a purchase just below a breakpoint, or they may fail to make recommendations regarding certain investments that are inconsistent with the client’s financial goals. In some cases, a broker may fail to inform an investor about the breakpoint commissions with the intent of misleading them into thinking that a recommendation is in the investor’s best interests. A securities lawyer can help you determine whether your broker engaged in negligence or fraud involving breakpoint selling.

If your broker or brokerage firm engaged in breakpoint selling in a negligent or fraudulent way, you can bring a lawsuit to recover compensation for the financial losses that you may have incurred as a result. In the lawsuit, you will need to show that the broker or brokerage firm failed to handle your account with appropriate care. Since brokers typically have more sophisticated knowledge than investors and laypersons regarding finances and investments, brokers are subject to a fiduciary duty when it comes to being candid with investors, providing timely professional advice, and refraining from making decisions based on whether they will result in profits for the broker or their firm. If your broker works for a brokerage firm, your attorney can also hold the brokerage firm liable based on a theory of vicarious liability. Under this doctrine, an employer is liable for the tortious acts that its employees commit. If you are successful in establishing that the broker failed to treat your account according to their fiduciary duty, you can receive compensation for the financial losses that you suffered. The amount will be calculated based on the difference between the estimated value of your account without the negligent conduct and the actual value of your account. A dedicated broker negligence lawyer can help you ensure that you seek the maximum amount of compensation that you deserve.

Realizing that your broker was asleep at the wheel or took advantage of your trust is an alarming experience. Although it may seem like your financial position is hopeless, there are legal remedies available to you that can help you recover the compensation that you need to make yourself whole. As a former stockbroker, Los Angeles attorney Steve A. Buchwalter has the experience and insight that you need to hold your broker responsible and aggressively assert your rights. We offer a free consultation to help you explore your remedies, so you have nothing to lose. Our clients are located throughout Los Angeles, Orange, Santa Barbara, and Ventura Counties, including in Santa Monica, Pasadena, Beverly Hills, Irvine, Newport Beach, Ventura, and Santa Barbara. Call us now at 1-(818) 501-8987 or contact us online to schedule your consultation.