Typical Securities Claims

Breach of Fiduciary Duty

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Breach of Fiduciary Duty

What is a Fiduciary Duty?
Fiduciary Duty is a legal obligation of one party to act in the best financial interest of another – to place another’s interests first – to make the client’s interests paramount. When a person, such as a Financial Advisor or Stockbroker, agrees to act in a fiduciary capacity, they are obligated to act in a manner that puts the client’s interests first. The law forbids the Stockbroker from acting in any manner adverse or contrary to the client’s interests, including acting for his own benefit when it is contrary to the client’s best interests. Clients are entitled to the best efforts of the fiduciary and the fiduciary must exercise all the skill, care and diligence at his/her disposal when acting on the client’s behalf.

When Does A Stockbroker Owe a Fiduciary Duty?
In Florida, one can argue that a Financial Advisor or Stockbroker always owes their client a fiduciary duty.  Financial Advisors would argue otherwise. Since investors are encouraged to place their trust and confidence in their Financial Advisor for their expertise and discretion in making investment decisions, Financial Advisors are expected to honor this trust by maintaining a high standard of honesty, including full disclosure of all material information, and may not benefit at the client’s expense.

On June 5, 2019, the SEC published “Regulation Best Interest”, which applies to Stockbrokers and Financial Advisors.  Regulation Best Interest imposes a new standard of conduct specifically for broker-dealers that substantially enhances the broker-dealer standard of conduct beyond existing suitability obligations.  The standard of conduct draws from key fiduciary principles and cannot be satisfied through disclosure alone.  It provides specific requirements to address certain aspects of the relationships between broker-dealers and their retail customers, including certain conflicts related to compensation.

When making a recommendation of a securities transaction or an investment strategy involving securities, a broker-dealer must act in the retail customer’s best interest and cannot place its own interests ahead of the customer’s interests.  Regulation Best Interest, in an enhancement from the proposal, applies to account recommendations, including recommendations to roll over or transfer assets in a workplace retirement plan account to an IRA, and recommendations to take a plan distribution.  It also applies to implicit “recommendations to hold” that result from agreed-upon account monitoring.

Other factors determining fiduciary standards include whether federal or state law applies.  Each state’s laws are different, and interpretations of federal law vary throughout the country.  Determining the existence of a fiduciary duty may include a consideration of the parties’ reasonable expectations regarding the relationship but not all relationships are considered equal.  In any relationship, each party has expectations, and whether those expectations are reasonable, or realistic, depends upon the parties’ communications, both express and implicit.

What Should You Expect?
One of the most frequently litigated issues is whether a Stockbroker/Financial Advisor has a continuing obligation to monitor investments that the advisor recommends. In other words, is the advisor obligated to stay current and tell you when negative news may impact your investment? This is a reasonable expectation by the investor. Marketing literature generally suggests that such an obligation not only exists, but advisors want investors to believe that monitoring investments is a very basic service.

Unfortunately, the Stockbroker’s lawyer will later argue that there was no duty to keep the investor informed unless it is spelled out in a contract.  Incredibly, there actually exists support in the law for this position.  It therefore makes sense, at the beginning of the investor / advisor relationship, to clearly articulate the extent of the Stockbroker’s duties.

What Does This All Mean?
The factors that determine fiduciary duty can be confusing. The Law Office of David A. Weintraub can help you understand your Stockbroker’s duties, and whether a fiduciary duty has been breached.

Typical Securities Claims

  • Breach of Fiduciary Duty


    Breach of Fiduciary Duty

    Fiduciary Duty is a legal obligation of one party to act in the best financial interest of another – to place another’s interests first – to make the client’s interests paramount. Read More

  • Unsuitability



    FINRA's suitability rule states that firms and their associated persons “must have a reasonable basis to believe” that a transaction or investment strategy involving a recommended security is suitable for the customer. This reasonable belief must be based on Read More

  • Failure to Diversify


    Failure to Diversify

    Failure to diversify means that a Stockbroker or Financial Advisor fails to recommend an appropriate allocation of one’s assets into different investment asset classes. Read More

  • Churning



    Churning, in its most basic form, occurs when a stockbroker/financial advisor buys and sells securities for and account, without regard for the customer’s investment interests, for the purpose of generating commissions. Read More

  • Unregistered Stockbrokers and Unregistered Sales Assistants


    Unregistered Stockbrokers and Unregistered Sales Assistants

    By law, stockbrokers and certain sales assistants must be registered with FINRA and with state regulators. If they fail to meet this requirement, an investor may have the right to cancel a purchase or sale. Read More

  • Unregistered Securities


    Unregistered Securities

    Before securities, such as stocks, bonds and notes can be offered for sale to the public, they first must be registered with the Securities and Exchange Commission and/or a state regulator. Read More

  • Concentrated Positions


    Concentrated Positions

    If you have a large percentage of your assets invested in a single stock or bond, a small number of stocks or bonds, or even a single sector of stocks or bonds , then you have a concentrated position. Concentrated positions expose the investor to significantly greater risk Read More

  • Negligence



    Negligence occurs when a financial advisor or stockbroker breaches a general duty of care resulting in damages.Just like the victim of an auto accident may be entitled to sue the driver who was at fault, the victim of a stockbroker’s negligence may also be entitled to seek relief. Read More

  • Unauthorized Trading


    Unauthorized Trading

    Unauthorized trading is the purchase or sale of securities that a Financial Advisor or Stockbroker makes for a customer without the customer’s permission. The Financial Industry Regulatory Authority (FINRA) has a specific rule that prohibits any Financial Advisor or Stockbroker from making unauthorized securities trades Read More

  • Breach of Contract


    Breach of Contract

    When an investor has an oral or written contract with a financial advisor or stockbroker, and that person breaches their contractual obligations, they may be financially responsible for the breach. Read More

  • Breach of Third Party Contract


    Breach of Third Party Contract

    In certain situations, you may be a third-party beneficiary of a brokerage firm’s contract with a regulator, such as FINRA. Read More

  • Failure to Follow Instructions


    Failure to Follow Instructions

    As a fundamental element of their relationship with the customer, Stockbrokers/Financial Advisors, as well as registered sales assistants, are required to follow the customer’s instructions.  They may be liable if they fail to do so.  Read More