Account Switch Fraud Schemes
In the experience of most lawyers who practice in the area of securities fraud and stockbroker fraud it is a rare exception that creates a problem the overwhelming majority, in our experience over 99% of the financial advisors and investment counselors in this country observe and conform to the highest standards of ethical conduct.
It was Winston Churchill who said it takes all kinds to make the world and that is the problem. Here's where the problem comes in: a small number of stockbrokers will commit this most offensive of frauds; the account switch fraud. When you create an account with an investment advisor, stockbroker, wire house, brokerage firm whether it be a boutique or a major Wall Street firm you expect for there to be one account in which all of the trades are recorded. All the rules governing financial transactions require you, the investor to know all of and have control of your assets. That is what an account is for. But the account switch fraud scheme works to defeat your expectations and is a most serious offense. The fraudulent stockbroker now has more than one account for you, and he moves your transactions around. Your losing trades are buried in the loss account, your winning trades are kept in your known account, and your transactions are unknown. Uncovering this account switch scam comes from years of seeing it and recognizing it in the transaction reports generated by subpoena at the beginning of the arbitration process. Being colorblind is the inability to see what others see, and only an experienced brokerage manager has seen this scam.
That is why my law office has among its core team member's former and experienced stockbroker managers: the men and women who run the offices with 50 or 100 individual stockbrokers. They have seen this scam and how it works under the radar. An account switch fraud scheme creates multiple trading accounts in which your transactions are moved about and by this method fees can be generated and losses hidden from investors. Fortunately this type of fraud is a rarity but if you are a victim of an account switch you probably won't know what until your lawyer tries and information with a subpoena from the clutching hands of a malfeasant financial professional.
If this can be established, this type of mismanagement of the account, the financial loss caused by the advisors improper acts and negligence constitutes a breach of the fiduciary duty owed. And the wire house or brokerage house that sheltered this type of fraudulent activity will be very much liable for this type of fraud. The problem is always finding and proving and that's what an experienced and persistent securities lawyer can do for you. These matters are always uncovered in the arbitration process and usually at the very end.
There is a lot of resistance to revealing the existence of multiple accounts and that often quite strategically buried in the computer systems of the brokerage house. Only an experienced broker manager with years in the industry can find and bring out the types of frauds. Scary thing is that you won't know about it until the very last moment when it will be revealed abracadabra when the subpoena is enforced. Here's where relying on effective litigator will prove the adage that a battle scarred trial lawyer can beat the pants, or skirts off of an office practice. It's in the street in the world of hard knocks that the experience needed to win in these types of combat situations and the niceties of arbitration come together. It shouldn't surprise you that most of the brokerage houses are anxious to uncover these types of frauds because of the almost unlimited liability they present.
You also find that only the more experienced stockbrokers can effectively create and run a hidden or switched account scam. It does however require the assistance and cooperation of the branch manager operations chief who is very often the first person you need to uncover to bring it out. Once the operations manager knows that you're aware of the multiple accounts and he or she becomes your strongest witness an ally in the arbitration process. These cases more often than not resolve with significant financial rewards as the stock brokerage house will see the problem and deal with you and honest and forthright manner. There is nothing other than the rights of the victim to be protected here and if you've been victimized by a financial professional who has committed the crimes of fraud in structuring a hidden account scam you will find your best ally is in an experienced and relentless approach towards winning back your financial losses.