BROKER MISREPRESENTATION;
NON-DISCLOSURE; CHURNING; AND
UNSUITABILITY ISSUES
Fiduciary Duty/Unsuitability
California stock brokers owe their customers a fiduciary duty of loyalty, honesty and due care. The California stock broker must always place the interests of his or her customer first; must fully disclose all facts necessary for the customer to make informed investment decisions; and must alert the customer to all material facts and information, whether or not the customer requests or inquires about the same. Part of a stock broker's fiduciary duty includes recommending to his or her customer only those investments which are suitable for the customer's needs, goals, and financial circumstances. Furthermore, the California stock broker has an affirmative duty to know his or her customer and to learn what are the customer's investment needs and goals, and all relevant facts concerning the customer's financial condition.
Most breach of fiduciary duty claims involve or include the unsuitability of an investment sold to the customer.
Churning
California stock brokers have an affirmative duty not to excessively trade, or "churn" their customers' accounts. Illegal churning occurs when a broker trades an account, i.e., buys and sells securities, more frequently than is warranted by the size or nature of the account, or is not in keeping with the customer's investment goals or needs. Churning generates increased commissions and fees for the stock broker and the brokerage firm, to the detriment and injury of the customer.
Violations of Law
California stock brokers breach their fiduciary duties owed to their customers whenever they misrepresent or fail to disclose all material facts, recommend unsuitable investments; give inappropriate or improper investment advice; fail to exercise due care and due diligence with respect to their customers' accounts; and fail to avoid lack of diversification of their customers' accounts, resulting in improper over-concentration in one investment vehicle, area or type. Other breaches of the law with respect to California stock brokers and stock brokerage firms include the failure to supervise brokers, overcharging, illegal commissions, excessive margin interest, delayed execution of investment orders, and biased financial analyst reports and recommendations.
If you or someone close to you is a victim of one of these violations of securities law, contact Virginia H. Gaburo & Associates to schedule a consultation at their La Jolla, California area offices.
For more information about securities law, visit the following Practice Information Pages on this website:
