5 Common Types of Stock Market Fraud
When you invest in the stock market, your main aim is to make a profit. However, what happens if your investment broker or financial advisor makes the wrong investment and loses your money, or you become a victim of stock market fraud?
Though investment fraud cases are common, you should be able to trust your brokerage firm or financial advisor to protect your money. They should be able to know more about a company that they chose to invest their money in before they do so.
However, if your stockbroker wrongs you, you can choose to pursue arbitration through the Financial Industry Regulation Authority (FINRA) to try and recover your money. It would help if you also considered working with a stock loss attorney to file a lawsuit against the brokerage firm or the company you invested in.
However, to determine if you are a victim of stock market fraud, you need to know what is classified as a fraud in the investment world. This is because every investment you make is a risk, and you can lose your money in other different ways other than fraud. Here are five common types of stock market fraud that you should be aware of:
To create additional brokerage, some firms use the investors’ money or account excessively. This is very common with investment brokers because if the investment is good, they generate good income. Investors and stockbrokers have a commission-based relationship, which allows them to invest and make money from your returns in the form of commissions. If the investor trades your account excessively over that period, you can sue them for churning.
2. Shell Companies
These are companies that use other big company names to lure investors, make money and avoid tax. Shell companies have no significant assets. Though not all shell companies are illegal, they can be accused of tax evasion, and this can cost you your investment.
Negligence and broker misconduct can cost you a lot of money. If you suspect that your brokerage firm did not exercise due diligence with your investment, you can speak to your stock attorney, and they will help you investigate and prove negligence.
Considering investors seek the help of experienced stockbrokers to help them invest, it is the duty of the broker to ensure that they supervise, advise, select, and execute the right trades. If they fail to do this and lose your money to a bad investment, you can sue them.
This is when a stockbroker knowingly invests your money in trades that are not in line with your goals. When you meet with a stockbroker, you share your interests, goals, and plans. The stockbroker will advise you on the right trades or investments that you should consider. These trades should meet your objectives. Therefore, if you lose your money because of unsuitability, your stock attorney can argue that the risk tolerance and your time horizon did not match with the investment.
When your broker or advisor shares an investment opportunity with you, they should also share all the facts, risks, and advantages of the investment. This will help you make an informed decision on whether to invest. If the broker is aware of a risk and fails to disclose that information with you, they can be guilty of fraud.
Get in Touch with a Stock Attorney
Understanding how the stock market and stockbrokers work can be very complicated, especially if you are not familiar with the stock exchange market. If you lose your money in this field and you suspect fraud, get in touch with an experienced stock attorney to help you investigate the investment or your broker and hold them accountable for their actions.