Preventing and Detecting Stockbroker Fraud

Have You Been the Victim of Stockbroker Fraud or Misconduct?

Identifying misconduct and steps to take to avoid being victimized

As investment portfolio values tumble, investors question whether they have been properly advised by their brokers and brokerage firms.

Most investors lack the expertise needed to detect stockbroker or brokerage firm misconduct, but there are things you can do if you suspect stockbroker fraud, and there are resources to turn to for answers or legal representation. The securities fraud attorneys at Dimond Kaplan & Rothstein, P.A. have both the investment knowledge and the legal experience to help you understand what has happened to your investment portfolio and whether wrongdoing occurred.

Our securities lawyers help investors recover investment losses by holding brokers and brokerage firms accountable for their negligent and fraudulent investment practices. Contact our Miami, Los Angeles, New York, or West Palm Beach securities law office to schedule a free consultation.

Steps you can take to avoid being victimized

Stockbroker misconduct cannot always be prevented, but there are things investors can do to minimize the chance of serious investment losses due to fraud or unethical broker behavior.

1. Investigate the broker’s background

Background information about brokers is maintained in a database called FINRA BrokerCheck®, which can be found at This database will reveal if investors have filed complaints against the broker, the amount of money paid to resolve the complaints, and whether the broker ever has been fined or suspended.

2. Complete and review new account forms fully and accurately

When an investor opens a brokerage account, they are required to complete various forms, including forms that state the client’s investment objectives, risk tolerance, income and net worth. Brokerage firms rely on these documents to determine if investments are suitable. If you later wish to bring a claim for unsuitable investment recommendations, these documents will provide essential support for your case. Investors should review these documents carefully to ensure that the information provided is accurate. Investors should not sign these forms in blank and allow brokers to fill in the information.

3. Review account statements and trade confirmations promptly

Investors should review trade confirmations and monthly account statements as soon as they are received. Do not rely on account summaries prepared by a broker. A careful review of these statements and confirmations can identify unauthorized trading and excessive trading.

4. Understand the true purpose of a “happiness” letter

When a brokerage firm’s reports reveal questionable account activity, many firms send a letter to a client commonly referred to as a “happiness” letter. The letter often instructs the client to contact the branch manager with any questions, without clearly stating that the transactions their account may involve questionable broker conduct.

Recognize this letter for what it is – a warning sign that you may have been the victim of stockbroker misconduct. Contact the branch manager and inform the branch manager of your investment objectives and risk tolerance. Ask if there has been any account activity that is inconsistent with your investor profile. If the branch manager identifies problems, request that changes be made to resolve the problems. You also should consider having an investment fraud lawyer review the letter.

5. Address Questionable Activity Immediately

Delays in contacting a broker or branch manager about account-related problems can decrease the possibility of bringing a successful claim for investment fraud or stockbroker misconduct. If you suspect questionable activity, address issues with brokers and branch managers as soon as possible. Document your concerns in writing.

6. Close the Account

Last, but certainly not least, if you identify broker misconduct, close your account, find another broker, and seek the advice of an experience securities fraud lawyer.

Advocating for Maximum Recovery of Your Investment Losses

For a free initial consultation about how to recover your investment losses, contact an experienced securities fraud lawyer at Dimond Kaplan & Rothstein. We represent investors throughout the United States to recoup investment losses due to stockbroker and brokerage firm misconduct and securities fraud. Call 888.578.6255 to discuss your claim.

EN   ES   PT     

Miami Office
Grand Bay Plaza
2665 S. Bayshore Drive
Penthouse 2B
Miami, FL 33133
Telephone: 786.628.8236

Los Angeles Office
Available by Appointment
2029 Century Park East
Century Plaza Tower
Suite 400N
Los Angeles, CA 90067
Telephone: 424.544.7930

New York City Office
Available by Appointment
14 Wall St, 20th Floor
New York, NY 10005
Telephone: 917.382.5217

West Palm Beach Office
Northbridge Centre
515 N. Flagler Drive, Suite P-300
West Palm Beach, FL 33401
Telephone: 561.475.2887

Detroit Office
41000 Woodward Avenue,
Suite 350 East
Bloomfield Hills, Mi 48304
Telephone: 248.368.0182