California law holds financial advisors to a high standard of conduct. If they breach this duty, they may be liable to their clients for any losses, even if the harmful conduct was not intentional. This is known as broker negligence. If you lost money because a Los Angeles financial professional acted carelessly, knowledgeable investment fraud lawyer Steve A. Buchwalter may be able to help you.Forms of Broker Negligence
Negligence is a concept applicable to many situations, including investor-advisor relationships. These claims usually start by showing that the defendant was required to abide by some standard of care in his or her interactions with the plaintiff. This is called a duty. Next, the plaintiff needs to prove that the defendant failed to live up to this requirement, and that this breach led directly to harm and damages.
Using basic negligence law, therefore, a broker can be held liable if he or she breached a duty that was owed to clients, and that behavior caused them to lose money. This is considered a type of “injury,” even though the harm is only financial. All brokers owe their clients a duty of reasonable care, which could be violated in any of several ways.
Brokers must perform due diligence on the investments they recommend to their clients by performing research to ensure that a security is what it purports to be, rather than a scam or fraud. This does not mean that a financial advisor must always recommend profitable investments, but failure to do basic research about the situation could constitute negligence. Due diligence extends beyond investments to a broker’s clients themselves. Financial advisors must learn about their circumstances and goals. Recommending an investment that is plainly wrong for a particular situation may also give rise to liability under negligence.
It is a commonly held belief that a diversified portfolio is less risky than a concentrated one. Depending on the particular circumstances, a financial advisor who fails to adequately diversify a client’s portfolio — especially when the client cannot afford a loss in the industry of concentration — may be held accountable for negligence.Financial Professionals Also Owe a Fiduciary Duty to Their Clients
In addition to a duty to exercise reasonable care when managing their clients’ cases, brokers may also owe them a fiduciary duty. This is broadly defined as an obligation to act in the investor’s best interest. This means that a broker cannot suggest an investment to a client purely because it will benefit the broker. Negligence and breach of fiduciary duty are somewhat related because careless behavior likely would also violate the fiduciary duty. However, behavior motivated by the advisor’s own benefit, which might otherwise not constitute negligence, could be a breach of the fiduciary duty because this imposes a higher standard than merely reasonable care. An experienced attorney can help you if you are unsure whether your broker has violated his or her fiduciary duty.Contact a Los Angeles Lawyer Familiar with Stock Fraud Claims
Investment professionals who fail to use proper diligence in advising clients in Ventura County and elsewhere can be held liable for any losses that ensue. Stock fraud attorney Steve A. Buchwalter has real-world experience as a financial advisor and can help investors burned by brokers in Santa Barbara, Irvine, and throughout Southern California. If you lost money because of an investment professional’s negligence, you can seek damages in court. For help evaluating your claim, call (818) 501-8987 or fill out our online contact form.