Exceptional and accessible legal representation across Kentucky and Nationwide


Everything You Need To Know About Investment Fraud

Last updated on January 29, 2024

When you think about investment fraud, who do you picture as the victim? For most, it’s probably an elderly person or a member of the wealthy elite. Hardly any regular, everyday person thinks it’s possible for investment fraud to happen to them, but it can – and it does.

Valenti Hanley PLLC represents domestic and international investors who suspect that their financial advisers or another party behaved fraudulently or that they are the victim of misrepresentation. With a combined experience of over 60 years practicing law, our attorneys, Jim McCrocklin and Michael Valenti have obtained millions of dollars worth of arbitration awards and settlements on behalf of investors located throughout the country and overseas. Among the claims we handle against national, regional and local firms are:

  • Investment fraud: When a broker causes an investor to make investments based on false information or deception
  • Churning accounts and excessive trading: Trading assets solely to generate additional commission
  • Unsuitable recommendations (suitability): Being misled into making an investment that serves the broker’s interests rather than your own
  • Negligence/failure to disclose risks: When a broker withholds information from an investor, leading them to make high-risk or mismanaged investments
  • Unauthorized transactions: A broker buying or trading assets without your permission
  • Breach of fiduciary duty/fraudulent conduct: When a broker fails to uphold the ethical standards of the duty they owe to their client
  • Failure to supervise agents of broker-dealers: When an investment firm fails to properly supervise their agents, causing fraudulent activity to go unchecked

If you suspect that fraudulent activity has occurred on your account, contact an investment fraud lawyer as soon as possible to begin an investigation. We can conduct a thorough review of your statements and accounts to uncover fraudulent activity. Mr. Valenti and Mr. McCrocklin have appeared in FINRA cases throughout the country. Mr. McCrocklin is also certified in FINRA arbitration and has served as Panel Chair on FINRA arbitration panels.

What Is Investment Fraud?

Investment fraud is an umbrella term for various illegal and deceptive investment practices. The common factor in all investment fraud is financial advisers serving their own financial interests rather than those of their clients. One example of investment fraud is a Ponzi scheme.

What Are The Signs Of Investment Fraud?

The following things could be red flags of potential investment fraud:

  • An unlicensed, unregistered or otherwise unqualified person selling or recommending investments
  • Making statements or promises that sound too good to be true
  • Infiltrating a religious or cultural group to gain people’s trust
  • Charging unexpected fees
  • Conflicts of interest like collecting commission on the investments they recommend
  • Selling an investment after less than a year
  • Moving money around to different stocks and other investments
  • Incurring unplanned tax liabilities
  • Not getting the return on investment you were promised
  • Unusual, unexpected, or unauthorized transactions or charges
  • Feeling pressured to act quickly without researching or carefully considering an investment

Essentially, if something feels off, shady or too good to be true, it could be a sign of fraud.

What Is Broker Misconduct?

Similar to investment fraud, broker misconduct can mean many different things. Overall, it means that a financial adviser or broker has deviated from their duty of care for gain, resulting in financial losses for their clients.

What Are Your Rights As The Customer Of A Financial Adviser?

As the customer of a financial adviser, you are entitled to:

  • Strategies that serve your interests
  • Thorough explanations of strategies and the risks associated with them
  • Privacy and discretion surrounding your investment portfolio and its activities
  • Reasonable access to your funds
  • Clear communication regarding their fees

If your financial adviser doesn’t provide you with the things listed above, it could be cause for concern.

What Are The Signs Of Fraudulent Advisers?

Some of the red flags that your financial adviser may not be acting in your best interests include:

  • Hidden fees and commissions
  • Purchasing stocks at the wrong risk level
  • Unsuitable stock purchases for elderly or unsophisticated customers
  • Moving your money into and out of different stocks
  • Selling investments sooner than 12 months after a purchase
  • They are not registered with any regulatory body

Sometimes investors ignore the red flags. This is not wise; if you have suspicions about your adviser, contact our stock broker fraud attorney at 866-617-6209.

What Role Does FINRA Play In Investment Fraud?

The Financial Industry Regulatory Authority (FINRA) is a nonprofit organization overseen by the Securities and Exchange Commission (SEC), the main federal agency charged with enforcing securities laws. Their mission is to protect investors and the integrity of capital markets.

Things FINRA does include:

  • Overseeing, testing, licensing, disciplining, sanctioning and suspending brokers and advisers
  • Monitoring securities markets using cutting edge technology to detect abusive transactions
  • Establishing and enforcing ethical standards for registered brokers and firms
  • Imposing fines and ordering the payment of restitution to wronged investors
  • Referring egregious violators to government agencies for assessment of civil or criminal securities law violations
  • Providing information and education to retail investors, including resources for older investors often targeted by scammers or unethical advisers
  • Accepting and investigating investor complaints against brokers and brokerage firms

FINRA also offers an alternative dispute resolution (ADR) program that uses mediation and arbitration to resolve investor disputes with their brokers and advisers.

When Is A Financial Professional Responsible For Your Losses?

You could have grounds for a lawsuit if they violated their fiduciary duty to you. In other words, if they put their own interests before yours. Professional negligence could also be grounds for a lawsuit. Examples of professional negligence include not following through on their promises or failing to conduct proper due diligence.

What Should You Do If You Have A Complaint Against Your Financial Adviser?

If you have a complaint regarding a financial adviser, the first thing you should do is contact the firm. If it was was a misunderstanding or an honest mistake, they should be able to resolve it quickly. If that isn’t successful, the next step is to file a written complaint with a regulating body like FINRA’s Investor Complaint Center, the Securities and Exchange Commission (SEC) or state securities regulators. These bodies can hold the adviser and firm responsible for the wrongdoing. Finally, if you need to recover compensation for losses you suffered due to your financial adviser, talk to an attorney about options for dispute resolution.

What Should You Do If You Suspect You Are The Victim Of Investment Fraud?

If you suspect investment fraud, speak to a securities fraud attorney immediately. Our attorneys can investigate your concerns and determine the next steps to take.

What You Need To File A Lawsuit Against A Financial Professional

In order to file a lawsuit, you need:

  • To demonstrate that you and your financial adviser had a contract
  • To prove that your financial adviser breached their fiduciary duty to you
  • To quantify your losses resulting from their breach of fiduciary duty

If you have the above information, you are on your way to building a case against your financial adviser.

Preserving Your Assets With Proactive Legal Representation

Raising capital in private placement transactions can be highly lucrative. However, brokers marketing private placements may not always have the best history. Often, they come with a history of investor complaints against them, regulatory actions, criminal charges or a slew of firings and disciplinary actions, or they do not use a clearinghouse. It is important that clients take a proactive approach, immediately retaining counsel if suspicious activity appears on the account. Our securities fraud lawyers’ experience in securities litigation and arbitration gives us the ability to spot inconsistencies and fraudulent activity, immediately taking action to protect your interests.

Advocating For Elderly Victims Of Fraud

Retirees or elderly people are often targeted by outright scam artists who peddle all manner of sketchy financial products. Unethical financial advisers also target the elderly, investing their clients’ money in speculative stocks, or companies that do not pay dividends or take other excessive risks with their money. Whether you are a senior citizen who believes that an unscrupulous person has taken advantage of you or you are the relative of a senior who is the victim of a scam, we can help you hold the perpetrator accountable for their actions.

Not All Investment Fraud Lawyers Are Created Equally

If you have suffered losses from investment fraud, you’re probably leery of the cost of hiring a lawyer. If you work with us, you don’t need to worry. We offer flexible fee arrangements and can work with you to ensure you can afford our services.

In their more than 60 years of experience, our attorneys have grown to understand all sides of investment fraud. Our clients choose us because they value our well-rounded knowledge of securities law.

In our eyes, no case is too big or small for us to take on. Because we’re a small firm, we can devote individualized attention to each client. You’ll speak with our attorneys directly. Your case will never be ignored or glossed over like they do at big law firms. We’ll fight to get you the justice and compensation you deserve.

Contact Our Firm For Trusted Investor Advocacy

At Valenti Hanley PLLC, our investment fraud attorneys maintain a comprehensive securities law practice and provide reliable investor legal representation. If you have reason to believe your financial adviser has steered you wrong, call our lawyers right away at toll-free 866-617-6209. You may also reach us online by completing our form.