Breach of Contract
- What Is a Contract?
- Do I Have a Contract With My Broker or Advisor?
- How Do I Know if My Broker/Advisor Breached My Contract?
- Can I Recover My Investment Funds if My Broker/Advisor Breached My Contract With Them?
- What Should I Do if My Broker/Advisor Breached My Investment Contract?
Generally, a contract is an agreement between two or more parties that obligates each party to perform, or not perform, certain duties as stipulated in the agreement. To create a legally enforceable contract, there must be (1) an offer, (2) acceptance, and (3) an exchange of consideration. Contracts can typically be written or verbal.
Every investment relationship should begin with an account opening agreement that serves as the basis for the terms of your relationship with your broker or investment advisor. The account opening agreement will dictate your rights in the investment relationship as well as the obligations that your broker/advisor owes to you. Other than the account opening agreement, you may have additional contracts with your broker/advisor, including options contracts, margin contracts, and discretionary contracts.
A contract is breached when one party to the agreement fails to abide by promises and obligations spelled out in the contract. In an investment relationship context, broker/advisors tend to breach contracts when they fail to perform according to the terms established with a customer at the start of an investment relationship or by failing to follow rules and regulations offered by regulatory agencies, like FINRA and the SEC.
If your investment contract with a broker, advisor, or financial institution has been breached, you may be entitled to compensation by way of damages. Normally, there are three types of damages available to victims of a breached contract: compensatory damages, liquidated damages, and punitive damages. Compensatory damages are intended to make the victim “whole,” as if the breach never occurred. Liquidated damages are those specifically spelled out in a contract should a breach occur. Finally, punitive damages are meant to punish the wrongdoing of the party that breached the contract.
If you have reason to believe that your broker/advisor breached your investment contract, you should consult with experienced Securities Law attorneys, like the ones at Malecki Law, to determine the merits of your claim. If you have a strong claim supported by evidence, you may be able to recover damages via mediation, arbitration, or litigation.