Broker Negligence Attorney


When you open a brokerage account, you are putting great faith in your broker. Even if you are directing your own trades, your broker plays an important role in the trade. Whatever their role, they owe you a duty of care. If your broker has breached that duty through negligence, you may be able to file a claim for financial compensation. Your mechanism for obtaining compensation is generally an arbitration claim with FINRA. If you believe that your broker has engaged in misconduct, contact Investor Loss Center today.

The Duties That Your Broker Owes You

Financial professionals owe their customers certain duties. A stockbroker is generally not a fiduciary if they are only executing orders that the customer gives them. However, a stockbroker or financial advisor does owe their customer a duty of care and would violate that duty if they are found to have been negligent.

A financial advisor is a fiduciary, owing two primary duties to their client:

  • The duty to exercise care, which is similar to the duty of care that the broker owes a customer.
  • The duty of loyalty to place the client’s interests over theirs and avoid conflicts of interest.

If your broker is not a fiduciary, they would still owe you some degree of care. When they have accepted your account, they have taken on the duty of care to act reasonably under the circumstances. Thus, both a broker and a financial advisor could conceivably be liable for negligence in their failure to uphold their duties of care.

If your individual broker has violated the rules, their employer may need to compensate you for your losses.

The Elements of a Broker Negligence Claim

A broker negligence claim would proceed just like any other type of lawsuit that is related to this type of wrongful conduct. While there are four parts to every negligence test, there are two elements that are extremely important:

  • You must prove that the broker acted unreasonably under the circumstances in a way that the ordinary broker of average skill would not have (violating their duty of care).
  • You must demonstrate that it was actually the broker’s conduct that cost you money, and you would not have lost the money anyway (causation).

Examples of Broker Negligence

Your broker has an entire business relationship with you. Being negligent in any aspect of this relationship could cost you money. Most often, negligence happens in connection with actual transactions in securities.

Examples of broker negligence include:

  • Failure to supervise registered representatives: FINRA Rule 3010 requires each broker to establish and maintain a system to supervise the activities of each registered representative, registered principal, and other associated person that is reasonably designed to achieve compliance with laws and rules.
  • Violations of Suitability Rules: FINRA rules require brokers to perform three different types of suitability analysis before they recommend a security to you. They must have a reasonable basis to believe that the security itself should be recommended, that it is fitting for your investment profile, and that it is quantitatively suitable in terms of your portfolio. Negligence can mean the broker failed to perform any research on the security before they recommended it to you.
  • Misrepresentation: Your broker may have made an affirmative misrepresentation, or they may have omitted material facts when recommending a transaction or communicating with you. FINRA rules prohibit registered firms from making false, misleading, or exaggerated statements or claims or omitting material information in all advertisements and sales literature directed to the public.
  • Execution of a trade: Your broker may have been negligent in how they executed a trade. They may have failed to provide a trade execution in a timely manner, costing you money. The same negligence could apply when your broker was selling securities in your portfolio to meet a margin call, or your broker may have failed to follow the specific instructions you gave them concerning your portfolio or a specific transaction.

Do I Have a Claim for Broker Negligence?

You may have been left with a large financial loss without knowing what caused it. You may suspect that your broker was to blame without understanding the specifics.

The first step to learning whether you have a claim for broker negligence is contacting an experienced investment loss attorney. Your lawyer can review your case and determine whether your broker violated the rules in a way that would make them liable to you in an arbitration claim. Your lawyer would conduct their own investigation and explain your potential path forward.

If your lawyer believes that you have a claim for broker negligence, they will accept your case and work toward filing an arbitration claim on your behalf.

How to Recover Financial Compensation for Negligence

To recover any financial compensation from your broker, you would need to file an arbitration claim with FINRA. When you sign your brokerage agreement, you agree to mandatory arbitration, which does not allow you to file a lawsuit against them in court. Arbitration itself gives you your figurative day in court.

Although you do not follow the full legal process of a lawsuit, FINRA arbitration has been effective for customers who have lost money due to broker negligence. Your case would have an arbitrator or a panel of arbitrators who would hear evidence and render a decision as to whether your broker owes you money.

You should hire an experienced FINRA arbitration attorney to put you in the strongest possible legal position. The lawyers at the Investor Loss Center have a track record of successfully pursuing brokers.

What Compensation Can I Recover for Broker Negligence?

You may be able to recover your actual financial losses when your broker has been negligent. If the arbitrator sides with you, they may award you substantial compensation. You could certainly qualify to recover your trading loss. You may also be paid for what you would have made if your account was well managed, including potential profits, dividends, and interest.

You may even be awarded punitive damages in serious cases of broker negligence. In most cases, punitive damages are only awarded when there is some element of intentional misconduct, gross negligence, or recklessness. However, arbitrators have been known to award punitive damages. If you have a strong case, it may make your broker more likely to negotiate a settlement with you.

Contact a Broker Negligence Attorney Today

The attorneys at the Investor Loss Center will aggressively pursue your broker to obtain financial compensation for you when they have broken the rules. Brokers know our attorneys mean business. You should contact an attorney as soon as possible after you discover that you have lost money. The first step is to schedule a free initial consultation with one of our attorneys.

You can speak to a lawyer by messaging us through our website or by calling us at (803)-805-7546.

There is no cost to you to talk to a lawyer, and you owe us nothing unless you win.



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