If money ends up missing from your investment accounts, you know that there's obvious wrongdoing and you need to take legal action. However, what happens when your investment adviser makes some serious mistakes that cost you a fortune? Can you sue, or are you simply the victim of bad luck and a volatile market?
When an adviser makes mistakes, it's hard for a layperson to tell the difference between professional negligence and poor decisions. Here is some important information you can use to determine that.
1. Know your rights as an investor.
The Investor Bill of Rights entitles you to a number of protections, including the right to:
- Be completely informed an investment risk in advance
- Receive copies of all your agreements and records
- Receive accurate, understandable statements
- Understand all the terms of your transactions, including fees, commissions and penalties
- Receive prompt attention to any complaints about your account from the investment company's compliance department or management
These rights and others are an important clue to what constitutes broker malpractice.
For example, if your broker misleads you about the financial risks prior to encouraging to invest, that could be an issue. Similarly, a failure to provide you with clear reports that give you an accurate assessment of your financial health can also be considered professional malpractice.
2. Be clear about your objectives and expect your broker to follow them.
You have the right to expect your investment professional to know and understand your investment objectives. That's part of the job. If your broker makes investments that run counter to those objectives, that may be a case of professional malpractice.
For example, if you don't have a lot of tolerance for risky investments, a broker that puts your money into some high-risk stocks (with the hopes of high returns) may be mismanaging your funds.
If you're uncertain whether or not you are the victim of professional malpractice by a financial advisor, consider talking to an attorney who can help you sort it out and decide what steps to take next.