My stock broker invested my money in extremely risky CD investments. Is this stock broker negligence?

Question:  I recently found out that my broker put almost all of my money into extremely risky CDS (credit default swaps) investment vehicles. I have always invested most of my money in CD’s (certificates of deposit) or bank savings accounts because my primary concern is the safety of my money.  Now I’m stuck in these risky CDS investments and I’m clueless.  What should I do?

Response:  When an investor has been using the same broker for an extended period of time, a trust is formed and the investor expects that the broker is going to understand their investment goals and help them make smart decisions.  If you have always been clear about the fact that you are an investor who does not like taking big risks, the actions of your broker could turn out to be Stock Broker Negligence.

The issue of Stock Broker Negligence comes up frequently around the issue of suitability of an investment.  Put simply, the idea behind suitability is that a broker must have a reasonable basis for recommending a particular securities purchase or a specific investment strategy to a client.  If an investor tells a broker that they want a low-risk investment with small returns, it would not be suitable for the broker to recommend high-risk investments that could double in value in six months.   If your broker did not have a reasonable belief that you were comfortable being invested in high-risk securities, the recommendation may not have been suitable and his actions could constitute Stock Broker Negligence.  If you suspect wrongdoing by your stock broker, you should consult with an attorney who specializes in securities law.  If you have been the victim of Stock Broker Negligence, a skilled attorney will likely be able to help.

Answered by D. Nicole Rosen

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Disclaimer: This site does not provide legal advice and users of this site should not interpret any of the information presented here as legal advice. The information provided merely conveys general information related to commonly asked legal questions. We are not a law firm and the employees responding to questions are not acting as your legal attorney. You should ultimately consult with a Lawyer for your case.

This site does not provide legal advice and users of this site should not interpret any of the information presented here as legal advice. The information provided merely conveys general information related to commonly asked legal questions. We are not a law firm and the employees responding to questions are not acting as your legal attorney. You should ultimately consult with a lawyer for your case.

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