Deceptive broker acts concerns actions which are between the financial advisor and the individual investor. Deceptive broker acts focuses on the conduct between the financial advisor and the investor and do not constitute courses of actions and practices which may be systemic. Arbitrators put greater weight in awarding financial damages when they see practices that are systemic. Systemic practices can be shown to arbitrators as being endemic to the practice of that individual and applies to all their clients. Systemic deceptive broker practices are punished much more harshly and most brokerage houses will fire the financial advisor when these systemic practices are brought to the attention in the arbitration. Deceptive broker acts are less compelling but nonetheless can be the reason for your individual losses. For example, if a client of mine is a retiree Boca Raton, and they tell me that their financial advisor called and told them that he covered a losing position in at stock and losses ended. If in fact the financial advisor did not act then the call is a deceptive broker act. A deceptive broker act can be a misrepresentation in connection with the sale of an investment: misrepresentation is one of the five most common grounds for arbitration awards.

The act of selling unregistered security is itself a breach of the fiduciary duty of the stockbroker. The act of selling unregistered securities, even if approved by the investor is a deceptive act if the investor is not advised that the securities are unregistered, regardless of what representations are made as to the appropriateness of that investment.

The act of churning, excessive activity, excessive trading, is a broker act. It may not be systemic throughout the brokerage practice but it is nonetheless a major breach and cause for liability for stockbrokers, their supervisors, and the stock brokerage house in which they maintain their practice. Again if I am a retiree living in Fort Lauderdale or Miami I should not be placed in investments which expose me to greater risk than the prudent rule investments that would be more appropriate.

The fiduciary duty of due care that a financial advisor owes to an investor is the essential element of the stockbroker, investor relationship. A fiduciary must act always in the best interest of their principal. If there is a conflict then the fiduciary must reveal the conflict and cannot act to harm the principal. Do not be confused by thinking that the stockbroker’s need to produce fee or transactional income creates a conflict.

If you pay a house painter to put paint on your walls he is going to be paid, likewise a stockbroker, financial advisor is not acting improperly when their activities generate income for them. It is when the income for the stockbroker is generated from transactions that are inappropriate, ill-suited, or involve unregistered securities that the breach occurs and liability follows.