No one is safe from losing money on investments. After all, the market is all about balancing risks and rewards, and some amount of loss is both expected and unavoidable. However, there are situations where investors can and should contact a lawyer to help them recover investment losses, and it’s important to know what those situations are. First because knowing will help you get your hard-earned money back, and second because your actions can help take bad actors off the market.
That’s because the majority of the situations in which an investor can sue someone to recover their losses relate to mistakes or misconduct on the part of agents in the financial market. Agents such as financial brokers, advisors, brokerage firms, and more all have certain duties when dealing with clients, and when you suffer losses due to breaches in those duties, you might be able to recover those losses with the help of an investment lawyer. This article covers potential legal claims and legal avenues an investor could pursue in order to recover investment losses, but we strongly encourage investors to reach out to an experienced investor lawyer if they believe they may have been victims of investment-related misconduct.
Generally speaking, breaches of conduct that could give you grounds to recover your losses include:
1 – Negligence
An investment advisor may be considered negligent when they fail to take important factors into account when using their client’s, or when offering financial advice. There are several important factors that an advisor should consider when making a recommendation, such as a client’s age, investment goals, investment experience, employment status, total net worth, and more.
A good example of this is an investor who recommends or performs aggressive and risky trades for a client who’s near retirement, using said client’s retirement funds. This would likely go against the client’s best interest, and major losses suffered under these conditions could ruin said client.
Of course what matters in the end, is not whether you believe your advisor was negligent, but whether or not said claims are strong enough to stand trial before a jury or a panel of arbitrators. This is why if you believe your losses might have been due to negligence, you should discuss the details with an experienced lawyer. The same applies to all the other types of misconduct in this article.
2 – Omissions and misrepresentations
You may be able to recover losses that were directly caused by omissions and misrepresentations. Financial advisors, stockbrokers, and investment advisors all must provide an accurate representation of the risks and projected future performance of a certain security, among other pieces of information.
Honest mistakes and changes due to market volatility are not causes for a lawsuit. But you may have grounds to recover your losses if the misrepresentation was caused by negligence, willful ignorance, or by intentional lies.
3 – Ponzi schemes
If you fall victim to a Ponzi scheme due to a recommendation from a financial advisor, talk to a lawyer. While on one hand financial advisors are not expected to be immune from financial schemes, on the other hand, they are expected to at least spot the obvious ones. If they failed to perform their due diligence, you might have a strong case.
4 – Unauthorized Trading
Depending on the type of your account, stockbrokers, financial advisors, or investment consultants might need formal permission to undertake transactions on your behalf. Losses suffered due to unauthorized trading may be recoverable.
5 – Churning
Even if you did allow your financial advisor to trade on your behalf, some behaviors are unacceptable. One example is the practice of churching, which involves the person in charge of your account performing an unusually high amount of trades every year to increase how much they make in fees and commissions.
Churning can potentially destroy one’s finances, and an experienced lawyer might be able to help you a) confirm that the advisor’s trading behavior was unusual and b) recover your losses.