File a Claim to Recover Losses after Stock Broker Misconduct

Your stock broker or advisor has certain duties when it comes to your account. If he exercises discretion in your account, he has a fiduciary duty (or an obligation to put your interests ahead of his own). If it is a traditional commission account, he has a duty to only recommend stocks that are appropriate (or suitable) for you given your age, time horizon, and risk tolerance.

Your stock broker is not a used car salesman.

When you go to a used car lot, you know that it is buyer beware, and the salesman can sell you a station wagon or a Ferrari, he has no obligation to make sure the car he recommends is appropriate for you. Your stock broker on the other hand, is not even supposed to bring up the Ferrari if he knows that a station wagon is appropriate for you. In fact, it is his job to know what is appropriate for you, that is why you hired him and why he gets a commission. If you have been the victim of stock broker misconduct, The Securities Lawyers in Milwaukee, WI, can help. 


If you suspect that your broker participated in unauthorized or risky investments that led to significant financial losses, it is your responsibility to file an arbitration claim through FINRA. The legal team at Halling & Cayo, S.C. can review your accounts and determine whether you have a case. Filing a claim against your broker and their company is the only way to recover losses that cannot be explained by the market.

Stock Broker Misconduct

Unfortunately, not all brokers adhere to this duty and they often recommend products that are wholly inappropriate for their customers. Perhaps it is because they earn a bigger commission from those products (as is common), perhaps they themselves do not understand why the product they are recommending is so risky (also common), or perhaps they simply want to replace your risk tolerance with their own and want to swing for the fences with your money (all too common).

If your stock broker or financial advisor has engaged in any of the following Stock Broker Misconduct, you may have a claim to recover your losses from the broker-dealer he was affiliated with.

Material Misrepresentation or Omission

It is a violation of State and Federal securities laws to make any material misrepresentation or omission of material fact in connection with the sale of any security. What this means, is that your broker is supposed to disclose all important facts about the product or stock he is selling you prior to your purchase. This includes any risks associated with the security or other aspects that an investor would want to know before deciding to buy it.


It is a breach of your brokers duty if he brings up, notifies, tells you about, or recommends any investments that are not appropriate or suitable  for you individually. This includes a recommendation for an investment that might be suitable for you except that in the concentration it is recommended it becomes unsuitable (ie, maybe its ok for 5% of your portfolio, but not 55%). This duty is in place to make sure the broker, who is in a position to know what is appropriate for each customer, is only introducing to you those investments that match your goals and risk tolerance.

The test is not whether the client considered the transactions suitable, but whether the [broker] ‘fulfilled the obligation he assumed when he undertook to counsel the client of making only such recommendations as would be consistent with the client’s financial situation and needs.

NASD Office of Hearing Officers Department of Enforcement v. Jack H. Stein Disciplinary Proceeding  No. C07000003.

You can read more about suing your broker for suitability claims here. 


It is a violation of your brokers duty if he recommends or implements such frequent trading in your account that it results in commissions for him while preventing you from actually making any money. As the 5th Circuit described it,

Churning occurs when a securities broker enters into transactions and manages a client’s account for the purpose of generating commissions and in disregard of his client’s interests.

Miley v. Oppenheimer & Co., 637 F.2d 318, 324, reh’g denied, 642 F.2d 1210 (5th Cir.1981).

Annuity Abuse

There are very limited circumstances in which a variable annuity is suitable for an individual investor. Time and again it has been shown the exorbitant costs of variable annuities outweigh any features or other positive elements of the investments. This is especially true when a broker recommends that a customer switch from one annuity to another. The SEC issued a report in 2004 as a result of its concerns over “the number of complaints and the unique characteristics of variable insurance products” and “because concerns have been raised about the sale of these products” and their “exorbitant”, “[h]igh commissions [which] drive sales of these products.”

Unauthorized Trading

There are two main types of accounts, fee based accounts where you give your stock broker or advisor discretion to buy and sell securities in your account, and your more traditional brokerage account where your broker is paid commissions for everything that is bought or sold. In those accounts, it is a breach of your broker’s duty to buy or sell anything without your permission. He has to call you and discuss each trade with you. If your broker has made trades in your account without your consent, you may have a claim for unauthorized trading.

Inappropriate Options Trading

Not all options are risky, or the fact that you agreed to some options trading in your account means that you have no claim if your broker recommends an unsuitable options strategy. As the 7th Circuit Court of appeals recently explained,

The fact that options can mitigate risk by hedging, as well as augment risk by speculation, means that a client’s assent to options trading does not imply agreement to take extra risk.

Patel v. Wagha, 866 F.3d 846, 848 (7th Cir. 2017).

There are types of options trading that extremely risky and only suitable for the most speculative of investors. If you have suffered losses as a result of options trading, you should have someone take a look at your account and see if what you authorized is what was being carried out.


If your broker engages in options trading, he is potentially making risky investments that are not appropriate for most investors. The legal team at Halling & Cayo, S.C. can help you determine whether you are eligible to pursue an options trading claim.