How to Handle Unsuitable Investments

Brokers and brokerage firms have an obligation to recommend only “suitable” investments when they make a recommendation to any investor. In order to be suitable for an investor, an investment must be consistent with an investor’s profile, including their investment objectives and risk tolerance. Otherwise, the investment (and the recommendation of that investment) is deemed to be unsuitable.

When making an investment recommendation, brokers and brokerage firms must consider an investor’s profile, which includes the investor’s:

  • Risk Tolerance
  • Investment Objective
  • Net Worth
  • Tax Considerations
  • Income Needs

For example, if your risk tolerance is low, and your broker recommends a high-risk security such as a complex structured product or a Regulation D private placement, that could be considered an unsuitable investment. If you live on a fixed income and you need a steady cash flow, but your broker recommends securities that do not provide monthly cash flow, that could be considered an unsuitable investment. Click here to view our video from partner Jeffrey Kaplan discussing unsuitable investments.

As an investor, it may be difficult to tell if you have been the victim of unsuitable investment recommendations or securities fraud. If you lost money in what you believe to be an unsuitable investment, contact the attorneys at Dimond Kaplan & Rothstein, P.A. We represent investors throughout the United States and Latin America whose brokers and brokerage firms have given them unsuitable investment advice. Contact us to schedule an appointment or consultation today.

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