FINRA Sales Practice Violations


Brokerage firms and their financial advisors are considered negligent when they fail to adhere to securities industry standards for the handling of customer accounts by not act as a reasonable and prudent financial advisor would have acted, and as a result of the negligent act or omission, the customer sustains investment losses. Brokerage firms make representations to the investing public concerning their financial expertise and the ability to manage investment accounts through media relations, advertising and publications. Investors are considered reasonable for the trust they place in brokerage firms when they laud their financial expertise.

Brokerage firms owe their customers a responsibility to adhere to financial services industry standard of care in maintaining and monitoring investment accounts. When the standard of care is violated, customers may suffer significant losses due to a brokerage firm’s and/or a financial advisor’s negligence. Brokerage firm negligence can be attributed to a lack of supervision and training of financial advisors when they are unaware of important information that they reasonably should have been known. Brokerage firms can be the subject of a negligence claim for the failure to supervise and adequately monitor the activities in a brokerage account. Negligence claims are usually made in conjunction with additional causes of action in a securities arbitration claim for damages.

The following examples may result in successful negligence claims for damage:

  • Failure to make suitable recommendations consistent with client investment profile;
  • Failure to recommend risk management strategies for concentrated stock positions;
  • Failure to conduct reasonable due diligence;
  • Failure to avoid taxable events in the rollover of tax qualified accounts;
  • Failure to monitor investor accounts for changes in customer circumstances and market conditions.

A negligent act does not have to be intentional to result in a viable securities arbitration claim for damages. Negligence does not require a willful or intentional act, but simply an omission or failure to act. Brokerage firms and its financial advisors cannot assert that they were unaware of the required securities industry standards, but are required to have known based on widely held standards of care or based on the required knowledge of economic and financial matters at issue.

To be held liable for negligence, it is not necessary for the financial advisor to have intended the consequences of the negligent act. If a reasonable, prudent person would have foreseen the potential for the consequences arising out of such an act and taken reasonable steps to prevent such consequences from occurring, the act can be deemed a negligent one.

Klayman & Toskes, PA and the Carlo Law Offices are dedicated to the rights of Puerto Rico investors. Our legal team can help you determine what steps can be taken to protect your investor rights. Puerto Rico investors who suffered losses as a result of negligence related to investments in UBS Puerto Rico Bond Funds may be able recover their losses in a FINRA arbitration claim for damages.

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Visit our Website for the Recovery of Puerto Rico Bond Fund Losses

For more information on how to start a claim, or to find out if you have a claim, please contact our law firm, toll free, at (787) 268-6444, for a free consultation.

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