Investment Fraud

Investment Fraud, also commonly referred to as securities fraud is an all too common story on the nightly news more and more. Fraud is often defined with intent to deceive. When that intent to deceive is in the investment and securities industry, it involves the misuse or mismanagement of other individuals or companies money with that intent to deceive. Elderly, the working middle class, and small companies are often victims of investment and securities fraud, but it can happen to anyone, even the most wealthy and educated. Securities investment and trading are closely regulated by many rules and laws with the purpose to protect the public investors. There are many deceptive practices meant to cheat people out of their hard earned money, so it is important to research and educate yourself before investing.

Recognizing securities and investment fraud is the beginning of the battle. The following is a list of warning signs, or "red flags," that may point to mismanagement of a securities or brokerage account. Existence of one or more of these warning signs does not always mean actual mismanagement, but it would encourage further inquiry. The client's initial contact with the broker (meaning a stockbroker or other investment professional) was through a "cold call;" the client is vulnerable to suggestions or pressures exerted by the broker due to age, infirmity, lack of sophistication, or other similar factors; whether sophisticated or not, the client does not understand the nature of the investment the broker has purchased; the broker uses high-pressure tactics to obtain client approval for trades or purchases; the broker makes promises of high returns coupled with low risk; the broker claims to give client access to investment opportunities normally available only to very wealthy or otherwise well-connected investors; the broker ignores or disparages client's stated investment objectives and risk tolerances; the broker places trades without the client's prior permission; the account statements reflect a high level of activity, with securities often being held short periods of time; the portfolio is overweight in volatile stocks in the technology, biotechnology, internet, energy or other "hot" sectors; the account has significantly underperformed benchmarks such as the Dow Jones Industrial Average or the S&P 500 Index; the account statement reflects risky investments, such as volatile stocks, derivatives (options, futures, foreign currency), microcap stocks (small companies with unfamiliar names), and bulletin board stocks (not listed on major stock exchanges); the cash balance reflected on an account statement unexpectedly shows up as a negative number, usually meaning securities have been purchased on margin; unexpected withdrawals of cash, particularly by wire transfer.

An informed investor is better able to protect him/herself or their company. However, if it is too late and you are already invested in a fraud or worse your money is gone, then there is a course of action to take in order to resolve your dispute with your broker and hopefully recover any lost investment that was a result of misuse and misappropriation by your broker. Brokerage firms and stock brokers have certain obligations to their customers and investors that believe their account has been abused or they have been defrauded need to consult a knowledgeable attorney regarding their rights. In securities and investment fraud cases, arbitration is often used as a more cost effective strategy to settle the dispute between the investor and stockbroker. The Pursley Law Firm has the experience and training for the best negotiation of your case.

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