Most Americans invest in the stock market. According to the results of a recent Gallup Poll, around 55 percent of residents hold individual stocks, mutual funds, or equities in a 401(k) or IRA. As popular as investing is, most Americans have mixed feelings about stockbrokers. They consider them trained professionals but worry about fraud, theft, and corrupt activity. According to the average business lawyer, they may be right to do so.

A Growing Trend

All of us have been shocked to see high-profile stockbrokers, investment advisers, and financiers routinely paraded to prison after bilking people out of their life savings. This prompts the obvious question: how safe is our money? To understand exactly how much protection an individual investor has from malfeasance, it is important to review the different types of duties a stockbroker has to his customers.

Legal Responsibilities

You’ve probably heard the term “fiduciary responsibility” or “fiduciary duty.” A person who manages money for the benefit of another is called a “fiduciary,” and the financier is, not surprisingly, called a “beneficiary.” In this type of relationship, the fiduciary is legally required to put the interests of the beneficiary above his own, which is called his fiduciary duty or responsibility. However, this relationship does not always exist, at least not in a comprehensive way, between an investor and his stockbroker.

More often than not, a regular broker who holds a Series 7 license is simply called a “registered representative.” Registered investment advisers, on the other hand, are fiduciaries, since they are responsible for planning your financial future, rather than simply trading securities. Of course, this does not mean that stockbrokers cannot be charged with crimes or sued for misconduct. It simply means that these cases tend to be a bit more complex because the relationship is not as clearly defined as a broker who has fiduciary duties.

What Is Fraud?

“Broker fraud” is a blanket term that is applied when a trusted financial advisor steps over the line and commits various forms of misconduct, including lying or deceit, theft, unauthorized transactions, poor investments, negligence, general incompetence, and churning. Churning is when a registered representative willfully engages in excessive trading simply to generate commissions for himself and not for the benefit of his client, the investor.

Contact An Investment Fraud Lawyer

When an investor loses his savings or retirement funds as the result of misconduct, incompetence, or fraud, he has the right to file a claim for recovery. Because investors must sign agreements with their brokerage firms that typically contain binding arbitration clauses, most recovery cases are resolved in securities arbitration instead of in an actual court. Generally speaking, an aggrieved investor has a much better chance of recovering some or all of what he is owed if he has an investment fraud lawyer by his side in these meetings.

Though the process is foreign to most Americans, arbitration is typically more expedient than regular court proceedings. To get things moving, it is important to have your lawyer file an arbitration claim as soon as possible after the misconduct has been discovered. Because many of these cases are settled before they go to arbitration, legal fees are far more affordable than litigation.

If you were robbed blind by a stockbroker you trusted, an experienced fraud attorney might be able to help you recover the money you are owed.