Top 10 signs you may have a claim against your broker

For the average investor, it is difficult to know when losses in your account might be recoverable. Here are the top 10 reasons you might have a claim for the losses in your brokerage account:

  1. Significant losses in your account that don’t track major market indexes – If you note that the S&P 500 are up and the Dow Jones is a at a record high, but your account is way down. That is the first sign that something improper may have been going on in your account.
  2. Excessive trading in your account – There are very few, if any, retail investors (that is people like you and me with retirement account) who should be using a frequent trading strategy. This can be known as churning and often results in significant losses in your account while generating significant commissions for your broker.
  3. Unauthorized trades – Unless you have a fee based account, where you gave your financial advisor trading authority, your broker is not supposed to make any trades in your account without your approval.
  4. Over-concentration – This often tracks with #1 above, an account which is over-concentrated in one particular asset class or one type of security can often severely under-perform the market. Your broker has a duty to make sure not just that each individual investment is suitable for your account, but also quantitatively that it is suitable for your account given what you are already invested in.
  5. Private Placement Investments – These are often sold as premium or high-net worth only investments. You will often see official sounding disclaimers like “Regulation D” with a common sales pitch that these are better than regular investments and its how the people with money make the big bucks. The reality is that many private placements are wildly speculative, entirely illiquid (meaning you cannot sell them if they start to go down), and risk loss of all of your money.
  6. Leveraged or Inverse ETFs – These are exchange traded funds that are designed to perform, on a day to day basis, as either a multiple of an index (like the S&P 500) or the reverse of the S&P 500. This is accomplished through a complex system of options and derivatives. Some financial advisors mistakenly believe they can be bought and held as a hedge against the market. This is not true,and due to the nature of these products and the built-in tracking error inherent in this kind of product, they are unsuitable to be bought and held by any retail investors.
  7. Options – Options trading can be extremely volatile and extremely risky. Depending on the Options strategy employed by your broker, you not only could lose all of your money, but you could lose even more than you had invested. Options are only suitable for a very small portion of the investing population and often lead to significant losses that retirees can neither afford nor replace.
  8. Oil and Gas investments – With the rapid expansion of the oil industry in the United States came a large number of Oil and Gas investments. Many of them were either poorly investigated, poorly managed, and in some instances were out right scams. Many investors saw significant losses as a result of being put into improper Oil and Gas investments.
  9. Equity indexed or Variable Annuity switching – Annuities pay very large commissions to those that sell them. For that reason, investors have to be wary of anyone that has put them into an annuity and then convinces them to switch it to another, different annuity. Most times this results in a big benefit to the financial advisor, but a big loss to the customer.
  10. Trade Confirmations marked “unsolicited” – Brokers have a duty to disclose to their company whether a particular investment was their idea or your idea. They do this by marking order tickets. After each trade you are sent a “Trade Confirmation” from your broker dealer which reflects whether the broker marked the order as “solicited” (his idea) or “unsolicited” (your idea). In an attempt to avoid supervision, some brokers will mark all, or most, trades as unsolicited despite the fact that the broker recommended each and every trade in the account. Mismarking of order tickets is a sure sign that something wrong is happening in your account.

If you have suffered losses in your account, and think it might be because of any one of these issues, give us a call and we would happy to look at your account and see if you have a claim.

Sean M. Sweeney is a shareholder at Halling and Cayo, a full service law firm in Milwaukee, WI and the head of its Securities Litigation team.

He represents individual and institutional investors in FINRA arbitration and court nationwide. He recovers investment losses from fraud or breach of duty from their broker-dealer.

Contact him at (414) 755-5020 or via e-mail at to see if he can help recover your funds.