What are investors’ typical claims against brokers?

Duties of a Broker

Brokers' job description is essentially to provide clients with fair and honest investment services. If a broker breaches this obligation, his clients have a variety of legal claims they can assert against him.

Claims Against Brokers

The most common claims are:

• Negligence – A negligence claim alleges that the broker did not use due diligence, or care, and did not act in a reasonable manner when handling the client’s investments.
• Breach of fiduciary duty – Since brokers handle clients’ money, they have a legal obligation to act in the best interests of their clients, also known as a “fiduciary duty.”  A claim for breach of fiduciary duty contends that the broker’s actions were not careful or loyal to the client, and therefore, not in the client’s best interest.
• Material misrepresentation – This claim asserts that the broker intentionally misled the client or failed to disclose important information about an investment.

 Other claims that a client may bring against a broker include:

• Unauthorized trading – An unauthorized trading claim charges that the broker used the client’s funds to engage in transactions without the client’s consent.
• Churning – With a churning claim, the client asserts that the broker completed transactions solely to acquire commission payments.
• Unsuitability – This claim alleges that the broker invested the client’s money in a way that was inappropriate for the client’s investment goals.