Can I sue my broker or financial advisor for breach of fiduciary duty?

The answer to this question is: Yes.  One most common lawsuits brought by an investor against a broker, financial advisor, and brokerage firm is a suit for breach of fiduciary duty.

What is a fiduciary duty?

A fiduciary duty is a legal duty to act solely in another party’s interest.  This type duty is created when one person in a relationship is placed in an elevated position of trust, which can be created by law or simply by position held by the individual.

Some examples of individuals that act in a fiduciary capacity are:

Powers of Attorney;
Personal Representatives;
Guardians; and,

The relationship between a Broker and his or her clients can be categorized as a fiduciary relationship, and as such, their failure to adhere to that standard of conduct can be cause for a lawsuit.  Most investors rely heavily on the advice of the financial representative and further, rely upon their brokerage firm to ensure that these individuals are qualified to render such assistance and are properly supervised.

A breach can arise from many different acts or omissions of a broker or brokerage firm.  When customers experience financial losses due to deviations from a fiduciary duty, they are entitled to file a lawsuit to recover their losses against the broker, and the brokerage firm.

Like any cause of action (i.e., a right of recovery against another at law), a breach of a fiduciary duty claim is made up of elements. Elements are generally a combination of certain acts committed by the bad actor, in conjunction with their level of culpability. The elements of a claim for breach of fiduciary duty are:

  1. a fiduciary duty;
  2. a breach of that duty;
  3. damages that are caused by that breach of the corresponding duty.

A breach of fiduciary duty can arise from the financial advisor’s failure to adequately monitor investment accounts, recommending imprudent or fraudulent investments, self dealing (i.e., purchasing investments that benefit the representative, not the investor), failing to properly advise the client about the nature of an investment, failing to keep investors apprised of changes to their investments, or making misrepresentations or untrue statements about investments.

All investments carry a risk that investment principal can be lost, but the losses should not be created by the person you trust to manage your portfolio.  When this happens, the broker and the brokerage firm should bear the risk of loss, not the investors.

Israels & Neuman PLC has knowledgeable securities attorneys that represent investors who have suffered losses due to the actions of brokers, financial representatives, and financial institutions.  We represent clients in all 50 states.

All of our financial arbitration cases are taken on a contingent fee basis, meaning that we do not get paid unless we recover compensation for you!

To find out more about what recovery options are available to you, please CONTACT ISRAELS & NEUMAN for a free consultation with an experienced attorney.