Investors

A broker and a broker dealers are licensed and registered professionals like a doctor or a lawyer. There are strict industry rules and securities laws that they need to follow. The thrust of all of the laws is disclosure, and imbedded in that disclosure requirement is not only that they give you complete and accurate information, but to make sure that you understand it. You should not need to be a New York City Securities Attorney to understand something you are investing in.

These days, securities products (like structured proprietary products created by the broker dealer, CMOs/CDOs, REITS, Annuities and the like) have become increasingly complicated. I can tell you as a litigator, I have sat in hearings where it was clear as day that the brokers themselves did not understand the product. Firms these days are notorious for withholding information from brokers, but that doesn’t mean that you don’t have a case, because the brokerage firm they work through (as an in the office or independent office) is responsible both for the brokers’ conduct, as well as its own conduct.

You will be required to go to arbitration in most cases. Watch Ms. Malecki on Wall Street Journal Live talking about it.

  1. Common Law Fraud (Scams) & Misrepresentations and Omissions under Federal Securities Laws
  2. Unsuitability
  3. Overconcentration
  4. Elder Fraud and Affinity Fraud
  5. Churning / Overtrading
  6. Unauthorized Trading
  7. New Products, Defective Securities Products and Structured Products
  8. Sales Practice Violations
  9. Breach of Fiduciary Duty
  10. Private Placements, “Hedge Funds”, Limited Partnership Issues & Other Non-Conventional Investments
  11. New Products, Defective Securities Products and Structured Products
  12. Margin Violations
  13. Failures to Execute
  14. Failure to Supervise
  15. Breach of Contract
  16. Forgery
  17. Conversion and Theft
  18. Market Manipulation

Even if a product is simple, or you or your broker understand the product, there’s another line that needs to be crossed – why are you buying the investment at this time, in this market, at this stage in your life? The same investment is not right for everyone and not right in the wrong market. When someone recommends something to you, they need to look at all these factors.

The problem with the brokerage industry is that brokers are commissioned salesmen, like car salesmen. I hear, time and time again, in meetings I have with brokers and in testimony at trials that the bulk of the supervision of their work centers around their production, rather than the value of their work to their clients. Bottom line: Can they sell ice to an Eskimo?

Having successfully represented small to high net worth investors in cases against some of the industry's largest brokerage firms, the Manhattan based securities fraud lawyers of Malecki Law provide free consultations and representation for investors to determine whether they have been victimized. Malecki Law's investment fraud attorneys have helped numerous investors recover tens of millions of dollars in losses and stand ready to represent you in lawsuits and arbitrations involving broker misconduct, fraud, negligence, and more.

Our investment fraud attorneys have experience in many forums, which we use to ensure the most advantageous and appropriate jurisdiction is being utilized for your case. Such forums include:

  • United States Securities and Exchange Commission ("SEC")
  • United States Commodities Futures Trading Commission
  • ("CFTC")
  • Financial Industry Regulatory Authority ("FINRA")
  • New York Stock Exchange ("NYSE")
  • American Stock Exchange ("AMEX")
  • National Futures Association ("NFA")
  • Municipal Securities Rulemaking Board ("MSRB")
  • Certified Financial Planners Board of Standards ("CFP Board")
  • Various State Attorney General Offices
  • Arbitration Forums
  • Mediation Forums
  • Federal Court
  • State Court

Our team of securities fraud lawyers at Malecki Law will provide legal advice and representation as a plaintiff or claimant in a multiplicity of matters ranging from routine suitability cases to complex disputes involving intricacies in federal securities laws and sophisticated commodities futures trading. The most risky products carry the highest commissions, but they are not products right for everyone. Often, problem products are pushed out to market at a higher commission at exactly the wrong time to buy the product – call it a clearance rack – the stuff people with real money, who may know better, would never touch. This leads to important areas where customers and their brokers and broker/dealers are in conflict with one another and a legal claim may arise:

1- Common Law Fraud (Scams) & Misrepresentations and Omissions under Federal Securities Laws

The activity above represents violations of specific rules created by state and federal government bodies to protect investors and the markets. Often these concerns involve specific lies a broker has told you or omissions of key facts by a broker making the balance of the information you have received untrue.

2- Unsuitability

Unsuitability is a broker’s recommendation of investments not appropriate for your age, income, and/or objectives. For more information explicitly defining the legal perimeters of unsuitability, consult the following FINRA rules and regulations:

3- Overconcentration

Failing to diversify your investments over asset class (type of security, i.e., stock, bond, mutual funds, cash, etc.) and sector (health care, financials, automotive, pharmaceuticals, consumer goods, technology, international, etc.), as well as "overconcentration" in any one of those areas may be the reason for your losses and an actionable claim against your broker.

4- Elder Fraud and Affinity Fraud

Dealing with senior citizens and those approaching retirement requires special care and planning, as well as generally have special needs of liquidity, income and safety. Knowing that, scurrilous professionals often try to market more speculative products, which have similar features but greater risk (and bigger commissions) to unsuspecting seniors and impending retirees. If you find yourself having experienced greater than expected losses and you are in or approaching retirement, that special care and planning may have been missing and you may have a claim.

Affinity fraud is defined as fraud specifically committed against members of a unified group. Examples include schemes that target the elderly (often within the same community), religious institutions, persons of a particular ethnicity, or professional organizations. Fraud is often committed by one who indoctrinates into the group in question, by convincing community leaders and other members that a crooked investment is legitimate. Many affinity scams involve “Ponzi” or pyramid schemes, wherein new investor money is paid to prior investors, so as to falsely make the investment appear profitable. In actuality, much or all of the money is stolen by the schemer(s).

5- Churning / Overtrading

Churning refers to the excessive account trading for the broker’s own commissions and/or profit, while exercising control over your money. Control is exercised in situations when an investor is unable to evaluate recommendations and a judgment is made by the broker on the investor’s behalf. Overtrading is essentially the same as churning, but refers to excessive trading that is not necessarily done for the purpose of generating commissions.

6- Unauthorized Trading

A broker’s trading of your account without asking your permission. A broker may sell your securities without first consulting you if the value of your margin account falls below your firm’s requirements. A broker may also sell your securities without notice if your account agreement dictates that securities may be sold to collect money that you have borrowed.

7- New Products, Defective Securities Products and Structured Products

As we have learned in the last market cycle, some securities products (such as CDOs, CMOs, and MBSs) should never have been sold to most investors. We deal with product failure issues in mutual funds, preferred securities, notes bonds, annuities, hedge funds, private placements, REITs, the aforementioned CDOs, CMOs, MBSs, and other structured products.

8- Sales Practice Violations

A broker’s engagement in fraudulent sales practices, such as high-pressure sales tactics and misrepresentations regarding the nature of the investments or his relationships with company executives.

9- Breach of Fiduciary Duty

When the broker does not use the high degree of care in handling your investments that you are entitled to, such as recommending junk bonds as safe, or an annuity in an IRA (Individual Retirement Account).

10- Private Placements, “Hedge Funds”, Limited Partnership Issues & Other Non-Conventional Investments

Investments (often unsuitable and illiquid) that a broker has recommended without disclosing the true nature of the investment, or recommended despite failing to conduct proper “due diligence” on them before investing. Private placements are discrete rounds of investments offered not publicly, but rather made available to selected private investors.

11- New Products, Defective Securities Products and Structured Products

As we have learned in the last market cycle, some securities products (such as CDOs, CMOs, and MBSs) should never have been sold to most investors. We deal with product failure issues in mutual funds, preferred securities, notes bonds, annuities, hedge funds, private placements, REITs, the aforementioned CDOs, CMOs, MBSs, and other structured products.

12- Margin Violations

A broker’s failure to properly disclose the risks of margin trading and terms of margin loans.

13- Failures to Execute

A broker not following a customer's direct instructions in a proper manner.

14- Failure to Supervise

When the brokerage firm's senior personnel fail to review their brokers' work.

15- Breach of Contract

A brokerage firm’s failure to live up to written and/or verbal agreements regarding the handling of your account.

16- Forgery

A broker’s wrongful signature of your name without your permission.

17- Conversion and Theft

A broker wrongfully taking control of your money, and/or transferring it to an account outside your control.

18- Market Manipulation

The creation of a fictitious market environment by brokers, traders, and/or analysts to suit only their own profit objectives. “Pump and dump schemes” (otherwise known as “hype and dump manipulation”) refers to the steering of investor toward a stock (typically microcap companies, defined as companies with a market capitalization of $300 million or less) through false or misleading statements. With the stock’s value overstated, the committer of this fraud then sells the stock for large profits. The promotion of such schemes is common to the Internet and telemarketing, often perpetuated by paid promoters looking to gain from false hype. Once the stock is entirely sold off (or “dumped”) by the promoter, its worth plummets at the investor’s peril.

Depending on the claim and the state or forum where it is brought, there may be different statutes of limitations or time limits that a customer has to bring a claim, even in arbitration. If you suspect broker wrongdoing has contributed to investment losses, you should promptly contact an attorney in order to protect your rights.

More Information on Statute Specifics from the North American Securities Administrators Association


Significant Arbitration & Mediation representations
  • Recovered over $7.2 Million in settlements for victims of a real estate based Ponzi scheme after a series of FINRA arbitration filings
  • Recovered $2 Million in settlement for a group of high net worth hedge fund investors during a FINRA arbitration
  • Recovered $3.9 Million for improperly recommended tax shelter fraud investments in NY State Court case
  • Settled millions of dollars of claims for investors against former football star turned broker, who engaged in a large scale fraud and theft of client funds using false statements and P.O. Boxes in a FINRA arbitration
  • FINRA arbitration representation for a retired entrepreneur in an over-concentration case of over $4 Million in losses in municipal bonds against a major financial institution
  • Successfully represented retired Irish national and partner of major insurance company against brokerage firm in a FINRA arbitration relating to cold-calling and fraudulent misrepresentation around investing in a health care start-up on margin
  • Successfully represented retired engineer in FINRA arbitration against brokerage firm relating to short-selling, margin and churning relating to positions in an energy company stock acquired after years of working in that company
  • Represented lottery winners in a FINRA arbitration who lost their winnings as a result of churning, unsuitability and fraud by a broker at a major financial institution
  • Represented brain-injured accident victim in a FINRA arbitration who lost personal injury settlement as a result of fraud, misrepresentation and unsuitability against a major financial firm

Attorney Advertisement. Prior results do not guarantee a similar outcome.