Securities fraud comes in many forms. If you are an investor, you should review the documents you receive from your brokerage firm and broker. These documents include the new account documents that were completed by either you or your broker. The new account documents are supposed to accurately reflect your investment objectives, risk tolerance, net-worth and income. This information serves as the basis for every recommendation the broker makes to you.

Additionally, you as an investor should review your trade confirmations and account statements. These documents should reflect the transactions that were authorized by you as the investor. Moreover, these documents reflect the amount of activity versus commission earned by the broker. The activity should make economic sense to you as the investor. For example, numerous opening and closing transactions initiated by the broker or brokerage firm in which the commissions generated are consistently greater than the profit to you as the investor does not make good economic sense to the investor.

Any departure from what the client actually provided to the broker and/or brokerage firm could be a basis for securities fraud. Indeed, a comparison of the activity in the account to information on the new account form can reveal such broker wrongdoing as:

  • Unsuitable securities recommendations
  • Unsuitable recommendation of the use of margin
  • Churning
  • Unauthorized trading