For many of us, understanding how to grow our investments and protect our finances from loss and excessive risk is beyond our level of sophistication. Without brokers, many of us would not have the time and ability to become familiar enough with the investing world to make our own decisions. As a result, investors rely heavily on a broker’s skill and honesty when it comes to putting their interests ahead of his or her own. There are numerous ways that brokers can defraud investor clients, or make decisions based on actions that would generate income for the broker even when it would be a detriment to the investor. One of the most common examples is front-running, which happens when a broker executes security orders for his or her own account before making the same trade on the investor’s behalf. Los Angeles securities law lawyer Steve A. Buchwalter has over two decades of experience handling these complex claims and knows what it takes to assert your rights against an unethical broker.Understanding the Practice of Front Running
Front-running is an all too common practice in the investment world. When a broker knows that transactions for a client or a group of clients will result in the security increasing or decreasing in price, the broker may be tempted to execute orders on his security holdings to improve his position. In most cases, the broker will either purchase for his or her own holdings before executing customer purchase orders that increase the price, or sell some of his holdings prior to making transactions on the customer’s behalf that will diminish the price. This is considered unethical because the brokerage firm is making transactions that are adverse to the financial interests of its clients.Bringing a Negligence Claim to Seek Compensation from a Broker
If you believe that your broker has engaged in front-running, you may be able to recover compensation by bringing a claim against him or her. Brokers owe their investor clients a heightened duty of care, due to the elevated level of trust that an investor places in his or her broker. Also, brokers are typically the more sophisticated party when it comes to investment transactions, placing the investor at a disadvantage when it comes to weighing and evaluating a broker’s advice and counsel.
To recover compensation from a broker who fails to act according to this fiduciary duty, the plaintiff must show that the broker did not act as a reasonably prudent and diligent broker would have acted on behalf of a client in a comparable situation. By its nature, front-running generally constitutes a breach of the duty because a diligent broker would not take advantage of a client to further his or her own financial position. If the plaintiff is successful in establishing this, he or she usually will be entitled to receive the difference between the value of his or her account after the defendant’s unethical front running and the amount that his or her account would likely have been worth had the defendant acted with due care.Contact an Experienced Los Angeles Lawyer for a Securities Law Claim
At the Law Offices of Steve A. Buchwalter, our team of experienced legal professionals provides seasoned guidance to investors throughout Southern California. Knowledgeable Los Angeles securities law attorney Steve A. Buchwalter offers a free consultation to help you determine your rights and options when you have been burned by a negligent broker. For a free consultation with a broker fraud attorney, call us at 818-501-8987 or contact us online. We represent investors throughout Los Angeles, Orange, and Venture Counties, including in cities such as Beverly Hills, Pasadena, Newport Beach, Irvine, and Santa Barbara.