Featured Investigation: July 2020

Brokerage firms are directly responsible for their agents and have a number of duties that they must perform to ensure that their brokers are playing by the rules and treating clients appropriately. Despite this, a number of brokerage firms either simply fail to abide by these rules or choose to look the other way even when presented with clear evidence of broker misbehavior. If you suffered financial losses because your brokerage firm failed to oversee its brokers and enforce well-established securities rules, you may be entitled to compensation. As a former broker, Los Angeles securities lawyer Steve A. Buchwalter understands how the securities industry operates. He now represents investors with legal claims for broker misconduct.

The Financial Industry Regulatory Authority (FINRA) is the agency responsible for creating and enforcing regulations that govern the securities market. In a recent enforcement action, FINRA investigated Western International Securities of Pasadena, California, regarding allegations that it failed in its supervisory duties. Western is a full-service retail brokerage firm that offers a variety of products including stocks, mutual funds, retirement accounts, and bonds. It has 175 office locations and 475 registered representatives.

According to FINRA’s investigation, between October 2011 and June 2018, Western failed to take adequate action in response to red flags identified during its own review processes that its agents were failing to disclose reportable financial events. According to FINRA Rule 3110(a), brokerage firms must establish a certain system for overseeing its representatives and ensuring that everyone is operating in full compliance with applicable securities rules and regulations. Western failed to establish, maintain, and enforce a system for supervising representatives in accordance with FINRA regulations. This involves a written procedure that is reasonably designed to ensure the timely reporting of events that must be disclosed under FINRA’s rules.

If you were an investor in Los Angeles who had business with Western during this period, it is important to review your accounts because you may have suffered from broker negligence or fraud as a result of Western’s failure to engage in appropriate supervisory capacities.

To recover compensation from a brokerage firm or broker who acted negligently or recklessly when handling your accounts, you must show that the party failed to handle your accounts according to the fiduciary duty it owed you and that your losses were a direct and foreseeable result of the failure. Brokers have a sophisticated amount of knowledge about finance and investing when compared to the average investor. As a result, they owe their clients the highest fiduciary duty in advising, counseling, and managing their clients’ money. This duty is similar to a trustee in that he or she has to act diligently and faithfully in all aspects regarding the client’s business affairs.

Proving that the brokerage firm or broker’s conduct was the cause of your loss can be difficult. The defendant may try to argue that some other factor was to blame such as market volatility. A securities lawyer can review your financial transactions and evaluate your case. If you are successful in showing a breach of fiduciary duty and a causal link, you are entitled to recover the difference between the actual value of your accounts after the negligent or reckless conduct and the estimated value that your accounts would contain had the brokerage firm or broker acted appropriately.

At the Law Office of Steve A. Buchwalter, our lead lawyer is experienced at helping countless investors recover funds from brokerage firms that failed to adequately oversee their brokers and representatives. He proudly serves clients throughout Orange County, Ventura County, Los Angeles County, and elsewhere throughout the State of California. He offers a free consultation to discuss your situation and how he may be able to assist you. Call his office at (818) 501-8987 or contact him online.