Unsuitability claims occur when an investor feels their broker recommended and lead them to agree to certain investment vehicles, which were not in line with the amount of risk and overall investment goals desired by an individual.  The foremost legal concern regarding unsuitability claims is the contract binding the investor to the broker or firm.  In 1987, the Supreme Court upheld that brokerage firms could include mandatory arbitration in event of dispute clauses in the customer agreements.  Currently, almost every single broker does so, and therefore, all investor disputes with brokers must be resolved exclusively through arbitration. 

Filing a Claim for Risky Investment Advice

Unsuitability arbitration may occur following a total lose in funds, or at the close of an unsuitable investment. The hardest problem in proving unsuitability claims is ascertaining what is “suitable” for a given investor. Even with decisions made by informed investors with clear details on the risk they are taking can later decide to file unsuitability claims up to several years later. Clear-cut examples abound in the news, such as a broker taking an elderly individuals pension earnings into risk-laden junk bond deal.  However, most cases are not easily resolved, unless some form of unauthorized trading occurred.    Additionally, unsuitability claims may be made years after the fact.  NYSE Rule 405 mandates brokers monitor both the investor and the type of transactions being made for that individual.  Another, NASD Rules of Fair Practice Article III Section 2, requires brokers to show reasonable grounds that a given investment was in line with other investment holdings, their individual financial picture, and their investment needs.

Getting Legal Help

If you have lost money due to unsuitable investments by your broker, or your broker has made rogue trades against your desires, contact a securities fraud attorney to represent your legal interests today.