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Be aware of certain things an investment broker cannot do

On Behalf of | May 14, 2021 | FINRA |

Residents of Pennsylvania who have investments should be aware of certain actions that are not allowed by investment brokers. This conduct, as stated by FINRA, is strictly prohibited.

Illegal actions to watch out for

Knowing which actions are legal, and which ones are not, when it comes to investments can help to prevent you from being victimized. The following are considered illegal:

  • Recommending unsuitable purchase of a security – Your age, financial situation, investment objective and investment experience must receive consideration.
  • Selling or purchasing without your authorization – They must contact you first. Written permission as to price and time may be acceptable.
  • Misrepresenting an investment – You should know about the risks of a security. Information about the company and fees involved is also required.
  • Switching a customer from one mutual fund to another – If there is no legitimate reason for the switch, it is prohibited by FINRA.
  • Removing funds from an account – You must authorize this first. It applies to removing securities as well.
  • Charging excessive markups – Commissions must not be excessive. This applies to markdowns and markups.
  • “Trading ahead” without valid exception – A clients’ limit order must be in place. There must be valid exceptions.
  • Guaranteeing you will not lose money – Brokers may not make specific price predictions. The rules forbid an agreement to share in any losses.
  • Performing private security transactions – These may be in violation of FINRA rules. Brokers must know about trades.

It is not permissible for a broker to buy a security while having material or non-public information. In addition, a broker could be held legally responsible for using manipulative, deceptive or other fraudulent methods to complete a transaction.

What you can do

If you think that your investment broker may be violating the law or mishandling your securities, it is wise to consult an attorney who has experience with FINRA law. They may help you pursue compensation while keeping your investments safe for a better future.


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