STOCKBROKER PROBLEMS
Selling Away
The securities industry is highly regulated. Brokers must get approved from supervision of all their activities, even those that might be considered “outside business activities.” Brokers and their brokerage firms are required to follow the federal and state securities laws, regulations issued by the SEC/FINRA and the rules of the brokerage firm itself.
Although the broker pretend that he is acting in your best interest, he maybe violation industry rules. Often, the customer does not even know what the broker is recommending is forbidden by industry rules.
A broker violates these rules when he or she recommends to a customer an alternative investment that is offered by a person or entity outside the brokerage firm. The broker may not tell the customer that the investment is being made outside of the brokerage firm. The broker may claim that the recommended “investment” is in the customer’s best interest, but the brokerage firm may not have reviewed or approved the “investment.” The brokerage firm may not have had the opportunity to complete any due diligence on the investment, and the “investment” might not have been recommended by the brokerage firm.
Since the brokerage firm does not know about this investment, it cannot supervise the broker’s activities. This is why it is critical for the brokerage firm to monitor its sales force’s outside business activities, to ensure its customers are protected. If they have not, the customers may be entitled to recover their entire losses on such investments.