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Every investor has unique financial objectives and goals, resources and risk tolerance.
A broker is obligated to provide recommendations that are consistent with this rationale. A broker has the duty to learn about his or her client's financial condition and only recommend investments and trading strategies that are suitable for them. Some brokers fail to perform this evaluation adequately, and investors have lost a disproportionate amount of assets in the recent market downturns. This is particularly harmful in the case of older investors approaching retirement, who have seen their life savings lost and now have to face legitimate concerns about their ability to finance their retirement.
A number of rules of the exchanges and professional organizations are in place to protect the investor. The National Association of Securities Dealers (NASD) Rule 2310 and New York Stock Exchange (NYSE) Rule 405 require that brokers know and understand their client's financial condition and investment goals before recommending investment options. NASD Rule 2310 requires brokers to have reasonable grounds for believing that a recommendation is suitable for their client, taking into account their other securities holdings, financial stability and their general expenses. The rule is applied across the board for the wealthiest of clients to those with very low risk tolerance. Similarly, NYSE Rule 405 requires brokers to "1) Use due diligence to learn the essential facts relative to every customer, every order, every cash or margin account accepted or carried by such organization…and 2) supervise diligently all accounts handled by registered representatives of the organization." The American Stock Exchange's (ASE) Rule 411 and the Chicago Board Options Exchange (CBOE) define similar rules.
If you have lost a disproportionate amount of funds in your retirement account, we can assist you in evaluating your case. Please contact one of our skilled retirement investment fraud lawyers by clicking on the link or the Contact Us button at the top of the page.