Stock brokers owe four main duties to their investing customers:
- The duty to recommend only “suitable” investments.
- The duty to disclose all material facts regarding an investment and to not misrepresent material facts about the investment.
- The duty to put their investing customer’s interests ahead of their own.
- The duty to engage in transactions only after receiving authorization from the investing customer.
An investment is “suitable” if it meets the customer’s investment objectives and is consistent with their tolerance for risk, their age, employment status and overall financial condition. An investment can be unsuitable if it (a) is too risky given the customer’s age and financial condition or (b) is too conservative given the customer’s need to earn a reasonable rate of return on his or her investments.
Other Frequently Asked Questions:
- Are Brokerage Firms Responsible For Investment Losses Caused By A Financial Advisor’s Misconduct?
- Financial Advisor Expungement: Past, Present & Future
- How Are Damages Calculated In A FINRA Arbitration?
- How Do Arbitrators Determine Suitability?
- How Do I Know If My Investments Are Suitable?
- What Are A Stock Broker’s Legal Obligations to Me?
- What Are The Benefits And Risks Of Using Margin In A Brokerage Account?
- What Are the Most Common Types of Broker Fraud or Negligence?
- What Laws Protect Against Elder Financial Abuse?