Broker did not diversify my account, what can I do?

If your broker failed to diversify your account, and you suffer losses as a result, you may have a claim for recovery. Sometimes the issue in an account is not just the types of investments your stock broker sells, whether they are bad products or not, but also the quantity of a particular investment that he recommends for your account. An investment that otherwise might be appropriate, or suitable, for your account in a small quantity, becomes decidedly unsuitable in large quantities. Whether this is over concentration or lack of diversification in a particular stock, or even in an asset class, it is against FINRA rules for your broker to fail to recommend a diversified investment portfolio. In one case, a broker was barred from the industry for his failure…

“[A] representative’s over-concentration of his customers in speculative, energy-sector securities violate[s] FINRA Rules 2111 (suitability) and 2010 (ethical standards).”


Your broker has a duty to only make suitable recommendations to you. Whether that means he recommends investments that are too risky for you, or because of the concentration in a particular investment or investment class (ie energy stocks, or mining stocks) you may have a claim to recover your losses.