If my financial advisor strongly advised me to buy a certain stock, would they be liable for any losses to that stock?

Question: I started working with a financial advisor recently to plan my retirement.  I told her that I was looking for low risk investments but was persuaded by my advisor to try some "new" stocks that were anticipated to give big returns.  Although I was reluctant at first, my advisor kept pressuring me so I decided to give it a shot.  It been about 14 months now and I've lost the majority of my investment.  Does this sound like investment fraud and can I get any money back?

Response: If a stock broker recommends that an investor purchase securities which the broker knows or should understand are not suited to the client's needs or investment goals, they could be liable for investment fraud or broker misconduct. 

In some cases, the stock broker may recommend high risk stocks to an older client whose actual needs are for stability and a consistent income.  Many brokerage firms may be pushing their brokers to sell particular stocks or specific stocks may generate more commission for the broker.  As a result, there may be a motivation for a broker to seek what suits their best interests instead of yours. 

The U.S. Securities and Exchange Commission (commonly known as the SEC) is an independent agency of the United States government which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets. Through the SEC, you have the option to file a complaint if you think you were the victim of broker fraud. 

Moving forward, please consult with a Securities Lawyer to learn the proper action to take in your case.

Answered by Jason Tong

Additional Resources:

• SEC Center for Complaints
• Securities Lawyers

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