COVID-19 Update: How We Are Serving and Protecting Our Clients

Securities Law

Consult an Investment Fraud Attorney Serving Los Angeles County

By virtue of working in the industry every day, brokers have an advantage over their clients, even those with investing experience. It is therefore disturbingly common for these professionals to defraud investors. Dedicated investment fraud lawyer Steve A. Buchwalter has the experience you need to pursue unscrupulous or negligent financial advisers in Los Angeles County or the surrounding region. If you have been burned by your broker, you may have a claim under California or federal securities law.

Laws on Misrepresentation and Negligence Provide Protections to Investors

California has strong laws that protect victims of brokers who engage in fraud or misrepresentation. Corporations Code § 25401 prohibits making false statements or omitting material facts during the sale of a security. Moreover, in California every stockbroker owes a fiduciary duty to his customers, meaning he is required to put his client’s interests above his own. The victims of fraud or omission, as defined by § 25401, may sue the broker for damages, which are statutorily defined as the amount paid for the security, plus interest, minus any profit realized. The broker’s only defenses are either that the plaintiff knew of the false information and bought the stock anyway, or the defendant was not aware of the material fact after performing proper due diligence.

California law does not require the investor to prove that he or she relied on the information in making his or her decision. This is an important difference between state and federal rules, making the former system much more favorable to victims of investment fraud.

Investment professionals must also perform due diligence both on recommended investments and on their own clients. Failure to go through this process may constitute broker negligence. Clients who suffer losses at the hands of a negligent investment professional may be able to hold that party accountable for his or her actions by seeking compensation for financial losses.

Fortunately, the application of California law is far-reaching. Section 25008 of the Corporations Code allows an investor to sue a fraudulent or negligent broker under the law of this state, even if the broker or client is located elsewhere, as long as the offer emanated from California or was accepted here.

In addition to the state laws, there are federal laws that prohibit misrepresentation and negligence on the part of securities brokers. The Securities Act of 1933 and the Securities Exchange Act of 1934 both offer some protection for investors. However, these federal laws usually require an individual to prove reliance on the fraudulent information or omission to recover damages. Essentially, this means that unless the truth would have changed the investor’s behavior, he or she cannot hold the broker accountable for wrongful actions. As explained above, this is not a prerequisite under California law.

Most financial advisers now require their clients to sign arbitration agreements, which require future disputes to be resolved outside the court system. In the event of a conflict, both parties make their case to a panel of neutral arbitrators. Investors should not assume that just because a dispute is not handled in court it is any less important. Private arbitration can be quicker and less expensive than a protracted court battle, and the results are binding. An experienced attorney can help investors make a strong case to the arbitration panel and expose broker fraud, negligence, or other breaches of fiduciary duty.

Protect Your Rights in Orange County by Consulting a Securities Fraud Lawyer

Investors injured by an unscrupulous or negligent broker may not even know where to start once they realize what’s happened. Fortunately, securities fraud attorney Steve A. Buchwalter knows how to help investors from Orange County and many other regions. Mr. Buchwalter is armed with the insights and skills necessary to evaluate potential claims; he and everyone on his staff is a former stockbroker. To see if we can help you, call (818) 501-8987, or visit our contact page, to arrange for a complimentary consultation. Our clients come from Beverly Hills, Pasadena, Newport Beach, Irvine, Santa Barbara, and all over Southern California. We also represent investors throughout the state and nationwide.