Featured Investigation: June 2020

We trust brokers at every step of the process. Whether it’s meeting our investment goals or achieving a sense of financial security, brokers and brokerage firm have a duty to carry out the objectives of their investor clients. There are far too many instances where a broker uses this relationship for his or her own gain by making investment decisions that provide benefits to his or her pocketbook even if they aren’t in line with what the client is seeking. Perhaps the most egregious example of brokers abusing their fiduciary duty to clients involves situations where a broker takes advantage of an elderly individual for the purpose of monetary gain. Los Angeles securities attorney Steve A. Buchwalter is a former stockbroker who now helps investors who have been burned by their brokers seek compensation for their harm.

The Financial Industry Regulatory Authority (FINRA) is the agency responsible for creating rules governing broker conduct and enforcing them. There are a number of rules in FINRA regulations that govern broker contact with regard to advising elderly individuals. In a recent enforcement action, FINRA determined that Glendora broker Steven Jun Lu of J.P. Morgan Chase violated some of these rules. According to its investigation, an 87-year-old elderly woman showing signs of dementia visited the branch office where Lu worked. She had bank statements from an entirely different bank and wanted to ask questions about her accounts. A few days after they met, Lu entered into a power of attorney agreement with her that named him as her attorney-in-fact with broad powers over her financial affairs. She also appointed him as co-trustee over her assets. In the trust agreement, Lu was named as the beneficiary of 75% of her assets.

This arrangement and other aspects of Lu’s conduct violated FINRA Rule 2010, which requires brokers to conduct their business with a high degree of commercial honor, and according to equitable principals of trade. It also violated the firm’s written supervisory procedures, which stated that members could only act as personal representatives or trustees for family members. Further, employees were prohibited from participating in transactions involving persons with whom the employee or the employee’s family had significant personal connections. As a result of this conduct, Lu was barred from working in the securities industry.

If you were burned by your broker, you can work with a knowledgeable securities lawyer in Los Angeles to bring a civil claim against them. In this kind of lawsuit, you would seek to recover the difference between the actual value of your account after the broker’s fraud or negligence and the estimated value that your account would contain had your broker acted appropriately. To prevail, you must show that your broker failed to act according to a high standard of fiduciary skill and care when handling your accounts. You can also show that the broker engaged in outright fraud and knowing deceit. You must show that your broker’s improper conduct was the direct cause of the financial harm that you suffered.

Determining whether your broker’s conduct is to blame for your financial losses or whether market fluctuations caused the losses can be difficult, which can make working with an experienced Los Angeles securities attorney helpful in advancing your claims. In cases involving allegations of elder abuse, it can also be difficult to determine facts surrounding how the parties met, whether the broker was simply seeking personal gain, and the nature of any interactions between the broker and the elderly individual. It may also be necessary to employ medical experts to establish that the elderly individual suffers from mental incapacitation.

Few things are more devastating than learning that your financial security has been shattered due to a broker’s negligence or reckless conduct. Fraud involving elderly individuals is even more unforgivable. If you or a loved one has been the target of exploitation or financial abuse at the hands of a broker, a securities attorney serving the Los Angeles area may be able to help. Steve A. Buchwalter offers a free consultation, and serves clients throughout communities including Pasadena, Malibu, Beverly Hills, and Los Angeles. Contact him today at (818) 501-8987 or contact him online to get started.