The PIABA Foundation, a 501(c)(3), provides unbiased investment education in an effort to prevent individuals from becoming victims of investment abuse or fraud. The Foundation was formed by a group of attorneys who specialize in representing investors in investment disputes with their securities professionals.
The Foundation attorneys have seen many cases where investors lose their life savings due to unsuitable or fraudulent investment recommendations by securities professionals. The Foundation will provide information about common investments subject to disputes and will help educate investors on dispute resolution.
Know Your Legal Rights.
Q. Can investors recover investment losses from brokers and their brokerage firms?
A. Yes. At a minimum, brokers and their firms are required to recommend suitable investments to their clients. When investors lose money due to bad investment recommendations or worse, financial fraud (i.e. investment abuse), brokers and brokerage firms can be held legally responsible to repay investors for the resulting losses.
Q. Where are investment disputes resolved?
A. Virtually all disputes with brokerage firms are resolved in FINRA arbitration. Typically, investors are prohibited from filing lawsuits in court because brokerage firms require their clients to sign away their right to a jury trial in the fine print of account opening documents.
Why Does Investment Abuse Happen?
Over the last decade, investments have become more complex and it has become more difficult for investors to understand the risks associated with investing. If you believe that you are a victim of investment abuse, DO NOT BLAME YOURSELF. You need to find help.
The types of bad investments change over time, but the reason bad investments are sold to investors never changes. The story always ends with brokers getting paid more to sell bad investments, i.e. conflicts of interests.
Brokers and brokerage firms have a legal obligation to disclose all important facts about investments before they recommend them to investors. Failure to disclose all material facts can give rise to legal claims for breach of fiduciary duty and securities fraud.
Types of Investments Commonly the Subject of Investment Disputes.
Investors who fall victim to investment scheme or bad investment advice often blame themselves for not doing more to avoid the situation. It is important for investors to understand, however, that they simply trusted the wrong person who is held out by his or her firm as an expert in investing. Investors hire financial professional for their investment knowledge and experience. As a result, most of the time, investors do not have the knowledge or ability to avoid becoming a victim of investment abuse. While the ways in which financial advisers steer investors into unsuitable investment differs, there are certain high commission investments that are commonly the subject of investor disputes.
Below is a non-exhaustive list of investments that are commonly the subject of investment disputes.
- Non-Traded REITs: Real Estate Investment Trust(s) (“REITs”)
- Oil & Gas MLPs, stocks and bonds
- Private Placements
- Variable Annuities
- Promissory Notes
- Tenants In Common (TICS)
- Hedge Funds
Brokers commonly make unsuitable recommendations of these investments to retirees, who need safe income-producing investments. These products are highly risky, illiquid, and very complex. They all pay high commissions and we have found that investors often are overconcentrated in the investments (i.e. >10%), which is per se unsuitable.