Securities arbitration lawyer Robert W. Pearce, a Florida based securities lawyer with a practice that is primarily representing investors in FINRA arbitrations against broker dealers and advisors, answers one of the more frequently asked questions: What are a stockbroker’s duties and responsibilities to investors?
My name is Robert Pearce and I’m a practicing securities litigation attorney and FINRA securities arbitration lawyer for over 40 years.
A stockbrokers duties to investors varies depending on the state in which you live, particularly when it comes to the fiduciary duties. Beginning June 30th this year, the SEC and FINRA have brought uniformity to the fiduciary duty rule with respect to recommendations of investments, strategies, account types, and the avoidance of conflicts of interest to all investors throughout the States by enacting the “Best Interest Rule.”
However, with respect to the transactions prior to June 30th, the “Suitability Rule,” still rules! And that rule is a stockbroker has a duty to only recommend investments, strategies, including the purchase of investments, the holding of investments, the sale of investments that are consistent and suitable in light of your investment objectives, your risk tolerance, your financial condition, your tax status, etc..
There are fiduciary duties that apply to all stockbrokers in favor of all investors in all states. As I mentioned, they have the fiduciary duty to: only recommend suitable investments. They also have the fiduciary duty to study all the investments and know the financial prognosis before he/she recommends them; only invest in investments after informing you fully of the risk associated with them; not make any misrepresentation of fact or any misleading statement; perform your orders properly; and to only enter orders with your express approval.
There are many duties and responsibilities that stockbrokers have to investors, and that’s why you need an experienced securities arbitration lawyer to advise you on whether you have a claim.