Do you have a case?

Whether you have a case or not depends on the specific facts surrounding the handling of your account by your broker or brokerage firm. It is impossible to determine whether you have a meritorious case until you contact The Portman Law Firm for a full and complete review of your account. However, below are summarized some of the theories of liability which may give rise to the recovery of damages in securities matters.

Breach of Fiduciary Duty

A fiduciary duty is the duty for someone to act for someone else’s benefit, while putting their own interests behind that of the other person. It is the highest standard of duty implied by law. Examples of fiduciary relationships include attorney-client, therapist-patient, and guardian-minor. The relationship between a stock broker and a customer normally is a fiduciary relationship since the investor looks to the broker for advice and the broker accepts that responsibility. When the fiduciary relationship exists between the investor and the brokerage firm, the obligation arises for the brokerage firm to act with the utmost duty of loyalty, good faith, and care toward the customer – sometimes they don’t.


Churning occurs when a broker engages in excessive trading of an investor’s account. Usually, a broker churns an account to create commissions, or revenue, for the broker and the brokerage firm. Careful review of the investor’s monthly statements is essential to determining whether churning has occurred. One indication of churning is, however, whether you believe that the broker is engaged in excessive trading in your account; that is, too many trades for your investment objectives and risk tolerance.

Unsuitable Investments

When you opened your account with the broker you were asked to complete a sign a New Account Form or Agreement. This form contains, among other things, information about your investment objectives and risk tolerance, including net worth and income. The broker and brokerage firm use this information to determine which securities are suitable; that is, which securities should be purchased in order to meet your investment objectives and fall within your tolerance for risk (that is, your willingness to loose principal). If you believe that risky securities were purchased for your account, and that you are not a risky investor, chances are that your broker is liable for recommending unsuitable investments.

Over-Concentration and Non-Diversification

One of the most important rules of investing is diversification. That is, your broker has a duty not to over-concentrate your portfolio in any individual investment or type of investment so that your account is exposed to too much risk of loss of principal. If you review your monthly statements and find that a particular investment comprises more than 10% to 15% of your overall portfolio value, and you have suffered losses, you might have been the subject of over-concentration and non-diversification by your broker or brokerage firm.


Failure to Supervise

Brokerage firms have obligations under their own rules and procedures, and the rules of the FINRA, to supervise the activities of their brokers. This duty includes review of your account to ensure that the investments meet with your investment objectives and risk tolerance. This duty also includes the obligation to review your account to ensure that the positions in your account are not over-concentrated (too large) and are not excessive transactions (churning). If the firm fails to supervise and monitor your account, the firm may be liable for its failure to supervise its brokers

Misrepresentation and Omission

The law prohibits brokers from making material misrepresentations about the investments they recommend and sell to you. A broker cannot omit information, especially information about risks, relating to the investment. If you believe you were sold an investment without full disclosure by your broker or brokerage firm, or that your broker or brokerage firm omitted some important information, the brokerage firm might be liable for misrepresentation or concealment.


Negligence is conduct which falls below the standard of care. Generally, negligence is the failure to use such care as a reasonably prudent and careful person would use under similar circumstances. If your broker’s conduct falls below the standard of care for other brokers under similar circumstances, then you would have recourse against the broker and brokerage firm.

Unauthorized Trading

The broker is obligated to communicate with you prior to purchasing a security in your account. If a security has been purchased in your account without your authorization, this constitutes a violation of securities rules and regulations, and provides you with a basis to recover damages.