Securities Fraud FAQ: What Is Prohibited?

by Wall Street Fraud on August 6, 2012

Philadelphia securities fraud attorneyOften, investors suspect that their broker has done something that is “not quite right,” but they aren’t sure if it is technically securities fraud. Under U.S. securities regulations, there is certain conduct that is explicitly prohibited.

Below is a short summary of the most common violations:

  • Recommending to a customer the purchase or sale of a security that is unsuitable given the customer's age, financial situation, investment objective and investment experience.
  • Purchasing or selling securities in a customer's account without first contacting the customer and receiving the customer's authorization to make the sale or purchase, unless the broker has received from the customer written discretionary authority to effect transactions in the account or the broker was given discretion as to price and time.
  • Switching a customer from one mutual fund to another when there is no legitimate investment purpose for the switch.
  • Misrepresenting or failing to disclose material facts concerning an investment, such as the risks of investing in a particular security or the charges or fees involved.
  • Removing funds or securities from a customer's account without the customer's prior authorization.
  • Charging a customer excessive markups, markdowns or commissions on the purchase or sale of securities.
  • Guaranteeing customers that they will not lose money on a particular securities transaction, making specific price predictions or agreeing to share in any losses in the customer's account.
  • Private securities transactions between a broker and a customer that may violate FINRA rules, particularly where the transactions are done without the knowledge and permission of the sales representative's firm.
  • "Trading ahead," which involves placing an order for the firm's account before entering a customer's limit order, without having a valid exception.
  • Failure by a market maker to display a customer limit order in its published quotes, without a valid exception.
  • Failing to use reasonable diligence to see that a customer's order is executed at the best possible price, given prevailing market conditions.
  • Purchasing or selling a security while in possession of material, non-public information about an issuer.
  • Using manipulative, deceptive or other fraudulent methods to effect a transaction in, or induce the purchase or sale of, a security.

Source: FINRA

Of course, this is not an exhaustive list. Therefore, if you feel that your broker may have defrauded you or violated a securities law, it is imperative to report the problem and seek the advice of an experienced securities fraud lawyer.

At Wall Street Fraud, we are dedicated to offering assistance to those who have been hurt by improper corporate or investment practices.

If you have been the victim of stock brokerage fraud, securities fraud, mutual fund fraud, stockbroker fraud, annuities fraud, or any other type of investment fraud or negligence, please contact our securities fraud attorneys today for a free case evaluation. Our talented and aggressive legal and professional staff is eager to help you recover your losses.


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