Financial Risk: From Stockbroker Misconduct to Reverse Mortgage Fraud | Dimond Kaplan & Rothstein, P.A. | Miami, West Palm Beach, Ft. Lauderdale

Financial Risk: From Stockbroker Misconduct to Reverse Mortgage Fraud

Financial Risk: From Stockbroker Misconduct to Reverse Mortgage Fraud

Black’s Law Dictionary defines “fraud” as “a tort arising from a knowing misrepresentation, concealment of material fact, or reckless misrepresentation made to induce another to act to his or her detriment.”

Investors and homeowners who entrust their assets to finance professionals, such as stockbrokers and mortgage brokers, rely on those professionals to represent their interests in exchange for a fee.

But for many investors and homeowners there is more at risk than they realize; in the worst cases, there can be outright fraud. From stockbroker misconduct to fraudulent lending, you should be aware of the warning signs of fraud, misconduct and scams that put your money and home at substantial risk.

Stockbroker Misconduct

A broker breaches his or her duties to a client by doing one or more of the following:

  • Making unsuitable investment recommendations, such as recommending risky stocks rather than conservative bonds for an elderly client (this is based on the individual investor profile which includes age, income, net worth, investment experience, and risk tolerance)
  • Churning the client’s account by making trades simply to generate commissions
  • Misrepresenting or omitting material facts about an investment, such as those facts an investor would otherwise feel important in making a decision to invest

In essence, a broker must put the client’s interests before their own. When this does not happen, an investor can incur significant losses.

An investor can prevent broker misconduct by:

  • 1. Researching the broker’s background for complaints, fines or suspensions (see and navigate to “broker check”);
  • 2. Reviewing the brokerage firm’s formal monthly account statements for unsuitable investments, unauthorized trading, and excessive trading; and
  • 3. Following up promptly with the brokerage firm if it sends information revealing questionable activity (a.k.a. “happiness” letters).
  • 4. Contacting a securities arbitration attorney if your broker and the brokerage firm do not resolve your concerns to your satisfaction. Most attorneys practicing in this field offer free consultations.

Reverse Mortgage Fraud

In Florida a significant portion of the population is composed of retirees. Many retirees live on a fixed income; in this economy, some retirees are forced to look for additional means of financial support. Reverse mortgages offer an alternative source of income — but many reverse mortgage brokers and other financial professionals offer nothing but scams.

A reverse annuity mortgage, as defined in Black’s Law Dictionary, is “a mortgage in which the lender disburses money over a long period to provide regular income to the (usu. elderly) borrower, and in which the loan is repaid in a lump sum when the borrower dies or when the property is sold.”

Reverse mortgages are legitimate financial tools used to help people cover living expenses through the conversion of home equity into cash. The cash is used to pay the balance of the mortgage and the remaining cash is paid to the homeowner.

The problem with reverse mortgages lies with the third party — the unscrupulous mortgage broker, title agent or financial advisor — who pockets the money rather than paying off the mortgage to the bank.

Many homeowners first learn they are victims of fraud when the bank calls to say they are behind on their mortgage payments and now face possible home foreclosure.

Seek a Lawyer’s Assistance

Sometimes lawyers can unravel the damage that’s been done. In other cases, the damage can only be remedied through a lawsuit to obtain financial compensation.

Securities arbitration and consumer protection lawyers offer a valuable service: unraveling or seeking justice for harm. Seek the advice of an attorney if you have been a victim of fraud.

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