SEC Finding Spotlight: March 2018
We trust our brokers and brokerage firms to help us make appropriate financial decisions for our goals and future security. Many brokers take this task seriously, but others unfortunately abuse their fiduciary roles for their own financial gain. Los Angeles securities fraud lawyer Steve A. Buchwalter has represented clients throughout Southern California for the last 20 years in a wide variety of broker negligence and misconduct matters. Because of his experience, Attorney Buchwalter even has appeared before the U.S. Senate as an expert witness regarding broker practices. A recent SEC decision and case resolution demonstrates how passionate we are about securing justice for our investor clients when a broker abuses his or her power. If you believe that you suffered financial losses as a result of your broker’s lack of attention or intentional misconduct, get in touch with us as soon as possible to start exploring your legal options.The SEC Takes a Firm Stance on Pump-And-Dump Schemes and Improper Broker Compensation
In a recent SEC decision, the agency affirmed that it is unlawful for a broker to receive undisclosed payments in the form of stock as part of a pump-and-dump scheme that the broker was fronting. In general, a pump-and-dump scheme is a type of securities fraud in which a broker artificially inflates the price of a stock that it owns or that its investors own so that it sells the stock at a higher price. The broker increases the value by spreading false and misleading information about the stock and its viability.
Four years ago, our legal team was one of the firms that sued the broker involved after we obtained evidence that the broker was receiving undisclosed payments. The broker used the stocks from a number of microcap insurers that she controlled to perpetrate the pump-and-dump scheme with a number of associates. The broker had registered representatives associated with her brokerage firm purchase these stocks in their customers’ accounts, thereby receiving undisclosed material benefits. A particularly egregious aspect of the case involved the fact that the undisclosed material benefits were paid to the broker’s husband. In its decision, the SEC specifically denounced this conduct as unlawful and identified a number of direct violations of specific federal securities laws.
Upon receiving evidence of this unlawful conduct, we contacted FINRA, which is the agency responsible for ensuring investor protection and market integrity in this country. We then settled the case on behalf of our investor clients who were harmed as a result of the broker’s reckless and intentional misconduct.Underlying Theories of Liability in These Cases
Brokers have a fiduciary duty to treat their clients with the utmost candor, diligence, and respect. Many brokers possess an advanced knowledge and understanding of financial markets, which is why investors are willing to pay them to handle their finances and investment portfolios. Although this knowledge is a major benefit, it also creates opportunities for brokers to take advantage of their clients’ lack of sophistication, or to engage in unlawful and hard-to-detect schemes that are ultimately not in their clients’ best interests.
If a broker fails to treat you according to the applicable fiduciary duty, you can bring a civil claim against him or her to recover compensation for any financial losses that you incur as a result of his or her negligent or fraudulent conduct. You can also possibly bring a claim against the brokerage firm that employs the broker, based on a vicarious liability theory. If you are successful in establishing liability, you will be entitled to receive the difference between the estimated value of your accounts had the broker not engaged in the negligent or fraudulent conduct and the actual value of your accounts.Contact a Los Angeles Lawyer to Hold a Fraudulent Broker Accountable
At the Law Office of Steve A. Buchwalter, we know how important your investments are to your financial security and your family’s future. Using years of experience as a licensed stockbroker and a commodity trading adviser, our lead attorney is ready to assist you with asserting your right to compensation from a broker who abused your trust. We represent clients in Los Angeles, Beverly Hills, Pasadena, Newport Beach, Irvine, Ventura, Santa Barbara, and other areas of Los Angeles, Orange, and Ventura Counties. Call us now at (818) 501-8987 or contact us online to set up your free consultation.