Investment losses are one of the risks people accept in exchange for the possibility of substantial returns on their resources. Any financial investment creates a degree of risk. People can potentially lose their invested capital or see their resources shrink in value.
Market downturns, company failures and other economic issues can produce sudden and surprising losses for those who have entrusted some of their resources to an investment professional. Individuals who don’t have the time to constantly monitor the stock market or research individual investment opportunities may rely on a broker or similar investment professional to manage their financial resources.
Unfortunately, those professionals can make mistakes or engage in misconduct that causes real harm to their clients. In some cases, frustrated clients who have suffered substantial financial setbacks may have grounds to pursue a brokerage malpractice claim against a professional who mishandled their resources.
What constitutes brokerage malpractice?
Simply losing money for clients is typically not malpractice. After all, that is one of the risks that comes with investing in stocks or other commodities. However, sometimes losses are representative of a bigger issue that could constitute actionable malpractice.
Perhaps a financial professional breached their fiduciary duty. They may have put their own financial interests above what was best for their clients. For example, they may have chosen to invest in a business run by someone they know because of a kickback arrangement. They may have used client funds to buy out their personal investment that they knew was about to suffer a loss.
Occasionally, brokerage professionals embezzle from clients or engage in financial schemes that may constitute fraud. In scenarios work those managing investments do not adhere to professional standards, put their interests above their clients or violate the law, their frustrated clients may have grounds to initiate a brokerage malpractice lawsuit.
Although the contracts that financial clients execute with brokerages tend to limit their ability to sue, egregious misconduct and professional negligence may warrant legal action both to compensate affected individuals and to create consequences for a financial professional who engaged in misconduct. Discussing the reasoning behind proposing a professional malpractice lawsuit with a skilled legal team can help people evaluate their options.
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