SEC Finding Spotlight: April 2020
Investors place a considerable amount of trust in their brokers and financial advisors, but many are unaware of the important boundaries that a broker must observe. If you believe that your broker has engaged in improper conduct and that your financial wellness has suffered as a result, you may be able to recoup your lost funds through a civil action. Brokers and financial advisors are held to a high standard of care when it comes to handling their clients’ finances, but unfortunately many of them choose to breach this duty or to exploit the relationship they have with their investor clients. Los Angeles securities lawyer Steve A. Buchwalter has been providing investors throughout Southern California with seasoned legal counsel for many years. If you believe you have been burned by your broker, we are ready to help you determine whether you are entitled to compensation.Broker Rules for Handling Client Funds
In a recent disciplinary proceeding, the Financial Industry Regulatory Authority (FINRA) enforced penalties against broker Martin Batstone of Independent Financial Group in San Diego. According to FINRA, between November 2015 and August 2016, Batstone secured a total of $75,000 from investor clients to invest in an energy drink company that allegedly worked with athletes and entertainers. Batstone did not obtain any written memorialization of the investment and instead relied on verbal exchanges. When soliciting these investments, Batstone told the customers they would be used to pay for the company’s general operation costs as well as the marketing of an energy drink product. Starting in November 2015 and ending in January 2017, however, Batstone pocketed an $11,000 portion of these funds for his own personal use, and applied the money to personal expenditures. Batstone did not provide written notice or otherwise inform the firm that he was soliciting the funds from these clients, rendering them as private securities transactions.
FINRA prohibits brokers from commingling client funds with personal funds, and from taking money from clients for personal reasons. The conduct in this case violated FINRA Rules 2150 and 2010. The first rule prohibits brokers from improper usage of a client’s funds, while the second rule requires brokers to conduct business according to the highest standards of commercial honor and equity. A knowledgeable securities attorney serving Los Angeles can evaluate the facts of your case to determine whether your broker adhered to these standards.Seeking Justice After Being Burned by Your Broker
If you were the subject of careless or intentionally fraudulent broker conduct, then you may be entitled to compensation in a civil case. In a lawsuit brought on this basis, the you must prove that your broker failed to act with the same fiduciary care and caution that a reasonable and prudent broker would use when handling a similar situation. This standard incorporates complying with FINRA’s rules governing how brokers must engage with clients.
The broker’s employer may also be liable for your losses. California recognizes the vicarious liability doctrine, which can be used to hold brokers liable for the negligent acts that their employees commit in the course and scope of employment. Also, FINRA imposes certain requirements on brokerage firms when it comes to supervising broker-employees and ensuring that all firm members are in compliance.
If you can prove that your broker was negligent or intentionally reckless, the next step is showing that this was the direct cause of your financial losses, and a skilled Los Angeles securities attorney can help you prove this causal connection. The broker may try to point to other factors like market fluctuations to explain why your accounts lost value. However, if you can show a causal relationship between the broker’s conduct and your losses, then you will be entitled to damages. This is typically calculated by taking the difference between the estimated value that your accounts should contain and the actual value of your accounts after the broker’s improper conduct.Seek Guidance From a Securities Lawyer in Los Angeles
Attorney Buchwalter understands how important your financial security is to you, and how devastating it can be to realize that your broker abused your relationship. As a former broker, he is well-versed in the rules that apply to broker conduct and can help you determine whether you may be entitled to compensation in a civil action. He proudly serves clients throughout Southern California, including Malibu, Beverly Hills, and Los Angeles. To schedule a free and confidential consultation, call him at (818) 501-8987 or contact him online to get started.