Valenti Hanley PLLC

Legal Issues Blog

Protect your investments by keeping a close eye on your portfolio

Investors should be able to count on their financial advisors to do what is in their clients' best interests. While many of them do what they should, there are some who are very self-serving. Instead of advising clients about what is best for the investor, they look at things from a selfish perspective and try to do what is going to make them the most money. In some cases, they will even take money that the investor thought was being added to their portfolio.

We realize that you put a lot of trust in your advisor. It might be hard to think that they are doing things that aren't right for you. Having to take action against them might be just as difficult for you to do, but you have to protect your portfolio. We can help you learn about the options that you have and move your chosen plan forward.

How does the law protect elderly investors from financial fraud?

While anyone can get scammed by a financial advisor, elderly people are particularly vulnerable to being taken advantage of in financial transactions. With that in mind, the Kentucky government established the Elder Investment Fraud and Financial Exploitation (EIFFE) Prevention program.

EIFFE's goal is to partner with adult service providers like medical professionals and others to identify instances where senior citizens are in danger of falling victim to financial fraud.

Protect your professional image against negative accusations

People who are involved in handling client investments know that there are often some complex elements associated with these duties. Trying to ensure that you are always in compliance with applicable laws and regulations can be complicated. There may be times when you need to answer for your actions to the Kentucky Department of Financial Institutions, Colorado Division of Securities, New York Stock Exchange, Financial Industry Regulatory Authority or U.S. Securities and Exchange Commission. In some cases, courts might also be involved.

We realize that this is a frightening position to be placed in. We are here to help you learn your options for the situation so you can make informed decisions about what you are going to do. Many times, there are lengthy investigations going on before anything is done. You are likely going to know about this while it is ongoing. If you are in this position, remember that it isn't ever too early to protect yourself.

What constitutes a breach of fiduciary duty in investment law?

Investment advisors often have a fiduciary obligation to their clients. Depending on the nature of the relationship between the client and the advisor, this fiduciary obligation could be stronger in some cases. When a broker or advisor is dishonest and makes decisions for their client that are not in the client's best interests, the advisor will have breached their fiduciary obligations and could be financially liable for the damages caused by this breach.

Interestingly, the advisor and/or broker is not the only one who will be liable in these cases. The investment firm will also be responsible for the damages caused by its employee.

Keep a close eye on your investments so you can act quickly

You have the right to expect that your financial advisor is going to do what is best for your financial future. You shouldn't have to worry about your investments just because you aren't watching these accounts daily. The problem that sometimes comes up is that investment professionals might not always behave in a way that is best for their clients.

Sometimes, these individuals become tempted by the amount of money they see flowing through these accounts. This is a bad situation because they might start to do things that benefit them instead of you. We know that this isn't something that investors want to consider, but it is a possibility when you have others over your accounts.

How a company can raise money privately

Raising money for your business brings a host of problems, not the least of which is finding people to invest.

Corporations can sell stock, LLCs can sell memberships and LLPs can sell partnership interests. Friends and family can invest. Promissory notes, unsecured business lines of credit and home equity lines of credit can all bring money to the business. Each is a well-trod way to raise capital and each brings its own inherent problems.

Has your company failed to register securities?

In the state of Kentucky and in the rest of the United States, companies are held to the Registration Under the Securities Act of 1933. This law means that companies must provide certain information so that transparency is maintained. This information is submitted through the registration of securities.

If your company failed to register securities in the state of Kentucky, it is important that you take the time to understand the law. There can be penalties that result from this failure; therefore, it is vital that your company takes immediate action.

Top benefits of hiring a securities attorney

Securities attorneys play an important role for both individuals and companies. Anyone can hire a securities attorney, but what are the benefits of doing so? We will explore the benefits of hiring such an attorney so you can make an informed decision.

One of the most important benefits of hiring a securities attorney is that the attorney will be able to advise if a broker violated the legal obligations they owe you. These obligations include the following:

  • Duty to determine if a product or service is good for your situation
  • Duty to disclose information related to investments that have been recommended
  • Duty to place your interests in front of their own interests, which is what's known as fiduciary duty

Dips in the stock market are a good time to re-examine strategies

The cyclical impact of the stock market makes it hard for new investors to gauge what is going on with their investments. You've probably heard that it is best to hang onto the investments you have during the dips. However, it can be hard not to panic when you see the account value starting to drop. There are several things you can do to protect yourself in these cases.

One of the most important things you can do is to compare your investment portfolio to what is going on in the market. You should notice if your investments are following the same trend as the market. If your portfolio balance is plummeting at a much faster rate than the market, you might need to take a deeper look into what's going on. If your investment banker is telling you that you don't need to worry and that your portfolio value is staying up despite the dipping market, you can still do your own investigating.

What are some questions to ask a potential investment advisor?

Keeping your investments in order is sometimes a challenge. It is imperative that you find a financial advisor who is right for your needs. This is especially true if your investments are complex or if your financial situation is complicated.

When you are considering working with an advisor, there are some important questions that you need to ask them to ensure they are doing what's best for you. These questions can give you an idea of what to expect:

  • What is your fee schedule? Some advisors charge a flat fee or hourly fee, but others charge a commission based on the value of the assets you have under their care. Typically, a flat or an hourly fee is what works best for many investors.
  • Are you a nonfiduciary or a fiduciary? A nonfiduciary has to recommend products that are suitable for you, but they don't have to stick to ones that are ideal for you or the lower cost. A fiduciary has to work solely in your best interests.
  • How much access will I have to you? You need to know that you will be able to contact your advisor when necessary. Find out what this will entail if you don't have an appointment. Are these issues handled via phone calls, emails or other methods? Additionally, you need to ask how often you will have meetings with the person.
  • Who is the custodian over the accounts? Bernie Madoff didn't use a custodian and you see what happened to those investors. A custodian, such as a brokerage, holds your investments, which provides an extra layer of security for you.
  • What type of asset allocation do you suggest? You need a diversified portfolio, so you want a person who is going to invest in a variety of companies. Discuss what types of companies you want to include, such as large-, mid- or small-cap companies, or domestic or international.
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