
There is no guarantee of return when investing in securities; therefore, you are liable to suffer a loss due to the vagaries of the market. That is why brokers and fiduciary advisors guide new investors to mitigate their risks. However, if you lose a substantial portion of your finances in a low-risk investment, you should investigate the possibility of misrepresentation & omissions.
Get in touch with our office today for a free consultation, or call us at (202)444-4222.
Literally, misrepresentation or omission is a falsification of material fact by a party in a deal to manipulate the other party into agreeing to a contract. In securities trading, It is classified as a Prohibited Conduct by FINRA. It means a broker or firm misrepresents materials and risks involved in an investment when recommending it to an investor.
Sometimes, the broker omits information that might discourage the investor from authorizing the investment.
Material facts may include the following;
The FINRA 2020 Rule, also known as FINRA’s anti-fraud regulation, prohibits brokerage firms and stockbrokers from distorting material facts while persuading an investor to buy or sell securities. The Rule reads, “No member shall effect any transaction in, or induce the purchase or sale of, any security by means of any manipulative, deceptive or other fraudulent device or contrivance.” Such behavior is also unethical and in violation of FINRA Rule 2010.
The SEC has also determined that a company or broker that intentionally or recklessly misleads an investor in connection with the sale or purchase of an investment violates Section 10(b) of the Exchange Act and Rule 10b-5, as well as the antifraud provisions of the securities laws.
There are three important elements to establish a misrepresentation and omission case:
The information must be material to be considered possible to be misrepresented or omitted. For information to be material, a reasonable person should deem it important to aid the assessment of security before deciding to transact.
The omission of a material fact has to be intentional from the broker’s end for it to be considered securities fraud. Fiduciary advisors may also be accused of omission if they fail to conduct due diligence before investing a customer’s money.
Misrepresenting statements that are, or purport to be, factual or represent the truth about securities can be considered fraud.
Meanwhile, personal opinions, predictions, or exaggerations are not prone to misrepresentation.
If you suspect your broker or advisor may have employed misrepresentation or omission, causing you investment losses, S.A. Law Group securities lawyers can help you recover your losses in a FINRA arbitration claim. Contact us or call us today at (202)444-4222 for a free consultation to evaluate the chance of your case.
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