Investor Topics
Stockbroker Misconduct & Failure to Supervise
When a broker breaks the rules — and when the firm that employed them is on the hook for failing to supervise.
Common forms of broker misconduct
Stockbroker misconduct includes recommending unsuitable investments, misrepresenting or omitting material risks, over-concentrating an account, excessive trading (churning), and unauthorized transactions. With structured products, the most common problems are unsuitability and misrepresentation of risk.
The firm's duty to supervise
Brokerage firms are legally required to supervise their representatives and to maintain systems reasonably designed to detect and prevent misconduct. When a firm ignores red flags — a broker concentrating clients in risky notes, for example — it can be held liable for failure to supervise.
Failure-to-supervise claims are powerful because the firm, not just the individual broker, is responsible — and the firm is the party with the resources to make a defrauded investor whole.
Holding both broker and firm accountable
In FINRA arbitration, investors frequently bring claims against both the individual broker and the firm. Recent structured-note awards have turned on a firm's failure to supervise a broker who concentrated client accounts in these products.
More Investor Topics
Regulation Best Interest (Reg BI)
The SEC rule that requires brokers to put your interests first — and what it means when they sell you a complex structured product anyway.
Learn moreConcentration & Unsuitability
Two of the most common — and most recoverable — problems behind structured-product losses.
Learn moreElder Financial Fraud
Older investors are disproportionately targeted for — and harmed by — complex, high-commission products. The law offers them particular protections.
Learn more
Talk to a structured products attorney — for free
Find out whether you have a claim in a free, confidential case evaluation. There is no obligation, and you pay no attorneys' fees unless we recover for you.*