How do Brokers and Advisors Steal? Let me count the ways!
One would think that brokers and advisors, some of whom work for the largest financial institutions, could be trusted to, at least, not outright steal your money or securities from your account. But it is usually those who you confide in the most that have the greatest opportunity to break that trust. After all they collect and hold your assets and personal identity information. They generally know the most about your finances at the brokerage firm and elsewhere.
This criminal behavior does not happen often, but when it does, it is usually by a desperate broker or advisor plagued with gambling debts, drug habit and/or a lifestyle he or she cannot afford to pay for without stealing from clients. But this article is not about why they do it; rather, it is about how they steal your assets or help someone else access your life savings; and how you recover the loss of funds and/or securities.
Theft and forgery go hand-in-hand when it comes to stealing money or securities from clients by brokers and advisors. With the advent of desktop computers and color printers, it has become relatively easy for brokers to reproduce official-looking account statements and photo-shop to alter other account records to perpetrate and cover up the crime. For example, some brokers have been known to transfer assets to other accounts through forged letters of authorization for wire transfer payments to their accounts or credit card companies to pay off their personal debts. The advisors then re-route the real account statements to a post office box or fictitious address and send forged account statements, confirms and other official-looking documents to their clients that reflect fictitious positions and money balances. This scheme enables brokers to lead the client to believe that his/her investment strategy is working and that he or she has nothing to be concerned about when the broker has actually withdrawn a client’s funds from the account.
Not all broker and advisor thefts have been so elaborate. Depending on the client, some have been as simple as asking the client for a loan that is never paid back; asking a client to invest in a fictitious company through a so-called private securities transaction; or collecting funds from a client or group of clients to pool their funds to invest in a fictitious account the broker or advisor is supposedly going to manage. Investments in promissory notes that the broker never intends to repay or repays by means of a Ponzi scheme (a scheme where one investor’s funds is used to repay the other investor) seem to be the most prevalent form of theft today. A close second is Elder Abuse and stealing from clients suffering from dementia, a crime for which the broker or advisor deserves severe punishment.
Generally, brokerage firms are vicariously (automatically) liable for all of their employees’ bad acts and omissions, including thefts from accounts. This is especially true when it comes to actual clients who had assets stolen from their accounts at the brokerage firms. But sometimes brokers and advisors use their credentials to steal from individuals who are not clients, and this is where an attorney’s knowledge and experience in recovering investors’ losses is paramount to the success of your case.
Unfortunately, the advisor has usually spent the money and your only recourse is against his or her employer for failure to supervise its employee. What were the red flags to the employer? How close did the firm monitor the broker and his lifestyle? Did the firm even have a supervisory system in place to detect these elaborate schemes?
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