Three Most Common Types of Financial Professional Malpractice

Can I Sue My Stock Broker?

In many industries, bringing a lawsuit against a professional or service provider for negligence or misconduct is common practice. Nearly everyone knows that, if a medical doctor makes a mistake during surgery or treatment, he or she may be subject to a lawsuit in order to recover damages resulting from the mistake. If a roofer does a shoddy job repairing your roof, you can take him or her to court and make them either redo the job correctly or pay for whatever repairs need to be one.

Financial Professionals Commit Malpractice Too

Interestingly, comparatively few Americans realize that, under certain circumstances, they can sue their stock broker and his or her brokerage firm in the even that something goes wrong in the account. The most important part of that sentence is really “under certain circumstances.” While those circumstances are certainly not unlimited, there are a number of issues related to financial professional malpractice that come up again and again.

The Most Common Types of Financial Professional Malpractice

Unsuitable Investments

Financial advisors in the US securities industry have a duty to their customers to place them in investments that are 1) suitable for any investor and 2) suitable for the particular investor at a given time. This is generally referred to as the “suitability rule” or standard. Because financial advisors and brokers are not held to the higher standard called fiduciary duty, in which the investor’s best interest must always supersede that of the broker, financial advisors have a tendency to choose investments that are maybe not the best for the investor but certainly lucrative for the advisor. This often leads to unsuitable investments, though of course there are many other ways in which unsuitability becomes an issue in an account.


Too much of a good thing, or lack of diversification in a portfolio. Sometimes financial advisors just fall in love with a given sector of the market and keep buying more stock on behalf of the investor. Pretty soon, the investor has the majority of his or her portfolio in one market, opening them up to a sudden reversal or period of volatility. This could spell doom for the account, and opens the stock broker open to claims of breach of duty and malpractice.

Excessive Risk

An investor’s portfolio must match his or her risk profile and tolerance. Over time, portfolios can drift out of alignment with an investor’s profile; or a bad broker can simply allow far too much risk to enter an account (through overconcentration or risky products). Either way, this is a violation of the broker’s duty to the customer, and can lead to a lawsuit.

Pennsylvania & New Jersey Stock Broker Misconduct Lawyers

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If you or someone you know has been the victim of investment fraud or broker misconduct, please contact our securities attorneys immediately for a free consultation at 215 462 3330 or by using our online contact form.