Understanding the Different Types of Investment Fraud

Obtaining professional investment guidance from a broker, firm, or financial advisor can help investors traverse the complex world of investment products. Unfortunately, investors can be exposed to exploitative or unscrupulous actions by an investment advisor. Given these complexities and the various types of investment fraud possibilities, victims are often unaware of their options and how to proceed with filing a claim. If you feel you are the victim of financial fraud, Sean M. Sweeney and his team of attorneys can review your case and determine whether your financial advisor has acted in a fraudulent or illegal manner or engaged in Stock Broker Misconduct. To schedule a consultation at our office in Milwaukee, WI, contact us by completing our online form or calling us directly at (414) 755-5020.

Our firm will not collect compensation for your case until it is settled. We do not collect payment unless we win your case.

Understanding Investment and Securities Fraud

Securities fraud, also known as investment fraud, refers to deceptive practices that may involve stocks, bonds, notes, and other commodities. Fraud often occurs as a result of a broker, money manager, or financial advisor engaging in deceptive practices to persuade an investor to make a risky or unsophisticated investment decision. In many cases, these unethical and illegal behaviors can result in huge financial losses and hardships.

Investment fraud often occurs as a result of a financial advisor engaging in deceptive practices to persuade an investor to make a risky decision.

Most Common Types of Investment Fraud

It is often difficult for an investor to know exactly what has happened with their investment, and whether their losses are the result of unscrupulous behavior on the part of their consultant. The complexities of these products often make it difficult for anyone other than a seasoned advisor to fully understand the nuances of specific investments. As a result, investors are sometimes at a greater risk of becoming the victim of investment fraud. Deceptive practices, scams, and illegal tactics can take on many forms, but some of the most common types of investment fraud include:

Churning: To generate more commissions, as opposed to increasing a client’s assets, a broker may engage in excessive trading that does not act in the best interest of their client. Churning is a violation of the U.S. Securities and Exchange Commission (SEC) rules and securities law. Churning does not always result in financial losses. In some cases, the harm being caused can be masked by profit in the account, though that profit is greatly reduced by the churning taking place.

Misrepresentation: This form of fraud can take on many forms that are often a result of an advisor misstating the risk of an investment. Deliberate misstatements, a lack of details, or the omission of information can be cause for a claim.

Unsuitability: It is the legal duty of a financial advisor to properly assess their client to learn about their financial position and make suitable recommendations. The failure to properly question an investor to learn more about their financial goals and position is a violation of FINRA’s (Financial Industry Regulatory Authority) suitability rules. Likewise, recommending investments that are too risky or otherwise inappropriate for an investor is a violation.

Unauthorized Trading: A financial advisor must not execute a transaction without the permission of their client. Failure to receive proper approval is a violation of industry rules, and may also violate federal laws.


If you have suffered a financial loss as a result of unauthorized trading by your broker, the legal team at Halling & Cayo, S.C. may be able to help you recover your losses. In most cases, a broker is responsible for obtaining your approval prior to each transaction and does not have the authority to make trades or investments otherwise. If you notice a trade or investment that you did not approve on your statement, you may be eligible for compensation.

Discuss Your Case Today

If you are unsure whether you are a victim of financial or investment fraud, attorney Sean Sweeney can investigate the specifics of your case. Our firm will not collect compensation for your case until the case is settled. We do not collect payment unless we win your case. Send our office a message or contact us at (414) 755-5020 to schedule a consultation today.