Securities & Investment Fraud

Levin Papantonio has successfully represented thousands of investment fraud victims in arbitration and in state and federal court. Our firm was established in 1955, and we have a team of nearly 50 attorneys and over 150 support staff.

We have received over 150 jury verdicts throughout the country in the amount of $1 million or more and achieved verdicts and settlements in excess of $40 billion. We have recovered hundreds of millions of dollars in securities and investment fraud cases.

Our team has successfully obtained numerous awards recovering all of our clients’ losses, fees, and costs. We have recovered numerous record-setting verdicts, including an award of over $19 million against UBS Financial Services relating to Puerto Rico Bonds and Closed-End Funds – the largest such arbitration award out of more than 3,500 claims filed.

Investors harmed by the recommendations of their broker or registered investment advisor may have a right to assert legal claims to recover their losses, including reimbursement of attorney’s fees and costs. Often, claims involve certain brokers or brokerage firms that recommended unsuitable products to many of their customers. We frequently handle regional or local cases surrounding similar misconduct or recommendations.

Most securities fraud claims are subject to mandatory arbitration before FINRA (the Financial Industry Regulatory Authority), which has its own set of unique procedural rules or other Arbitration forums like the AAA (American Arbitration Association) or JAMS. Our Securities and Business Litigation practice group has decades of experience handling stockbroker claims in arbitration and in state and federal courts.

We handle claims both big and small involving all types of complex securities and investments, including allegations of unsuitability, overconcentration, portfolio mismanagement, breach of fiduciary duty, excessive fees or commissions, excessive trading or churning, negligence, failure to supervise, and more.

Active Investigations and Lawsuits

stock exchange

When you trust an investment firm to maintain (and hopefully grow) your savings, you expect to receive professional and accurate information tailored to your particular circumstances.

Sometimes unscrupulous stockbrokers and investment advisors take advantage of your trust, and you can find yourself facing the loss of your life savings. Whether your loss is due to unsuitable investment advice, conflicts of interest, or investment fraud, all you know is your retirement income is gone.

Our securities and investment fraud lawyers are dedicated to helping victims recover financial losses caused by stockbroker fraud, broker misconduct, and unsuitable recommendations.

Types of Securities and Investment Fraud

Investment fraud and broker misconduct can take many forms. While claims often center on a particular broker’s misconduct or misrepresentations, in many instances, the broker or advisor is also a victim of the brokerage firm involved.

We provide free reviews of potential claims at no charge to you, and we are available to analyze your portfolio to determine if misconduct caused you to suffer losses. Below are a sample of the type of securities and investment issues we analyze and litigate every day.


Unsuitable investment recommendations by your financial advisor/broker can be considered fraud. Suitability obligations are critical to ensuring investor protection and promoting fair dealings with customers and ethical sales practices.

FINRA Rule 2111 governs general suitability obligations. FINRA Rule 2111 requires that a brokerage firm or financial advisor has a reasonable basis to believe a recommended transaction or investment strategy involving a security or securities is suitable for the customer. This is based on the information obtained through the reasonable diligence of the firm or the advisor to ascertain the customer’s investment profile.

If a brokerage firm or a financial advisor fails to perform the due diligence necessary to make a proper recommendation, then their clients may be able to recover for their losses. Brokerage firms typically require customers to sign an agreement with a mandatory arbitration provision. This limits the ability of customers to engage in traditional lawsuits. Instead, the complaints will be handled through the FINRA arbitration process, which we handle every day.


Negligent misrepresentation occurs when a financial advisor provides false information to the customer because he/she is careless or negligent. In certain cases, financial advisors are provided incomplete or incorrect information by their brokerage firm, which leads to a failure to provide the investor with proper representations.

Oftentimes, the claimed safety of the investment is the false misrepresentation. When advisors recommend an investment opportunity, they are required by state and federal law to provide you with all the relevant facts necessary to make an informed decision about whether or not to invest. The presentations of the relevant facts and the risks and rewards are required to be a balanced presentation of the relevant risks and rewards.

Alternative Investments

Alternative investments are non-traditional investments or NCIs. They are investments that are not publicly traded and are typically illiquid for a period of time or forever. Many alternative investments tend to require a minimum investment and charge higher fees and commissions than traditional investments. They also tend to be high-risk and volatile.

Alternatives can appear attractive to investors because they can offer higher returns than traditional investments. This does not mean they are suitable for most retail investors, especially retirees and unsophisticated investors, because of potential illiquidity issues and the risk of principal loss. In fact, FINRA reminded brokerage firms and advisors regarding alternatives as far back as 2003, warning that that these types of investments may be suitable for only a very narrow band of investors capable of evaluating and being financially able to bear those risks.

Losses in alternative investments can often be attributable to misrepresentations, unsuitability, breach of fiduciary duty, negligence, misappropriation, and failure to supervise by brokerage firms.

Bond Fraud and Misconduct

Bonds are debts sold by companies or government entities to investors to raise capital. They are offered by financial advisors and brokers as safe investments. But bond fraud can cost innocent investors substantial portions of their portfolios and retirement savings, and it is a problem that tends to increase amid recessions. Fixed income investments are supposed to be the cornerstone or foundation of a well-diversified portfolio. Your fixed income holdings are not supposed to be where an investor takes significant risk.

Types of Bonds

There are four general categories of bonds that are offered to investors:

  • Corporate bonds: Bonds issued by a company to generate funds
  • Federal bonds: Bonds sold by the federal government, such as U.S. Treasury bills (T-bills) and U.S. savings bonds
  • Municipal bonds: Bonds issued by states, cities or other government entities to fund civic projects
  • Agency bonds: Bonds issued by government agencies or government-sponsored enterprises; these include mortgage-backed securities such as those offered by the Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac) and the Government National Mortgage Association (GNMA, or Ginnie Mae)

There are different forms of bonds within these categories, and bonds may be purchased individually or through bond funds, in which investors buy into pools of bonds in a manner similar to mutual funds. High yield junk bonds have significantly more risk than investment grade bonds. In addition, junk bonds typically move up and down with stocks and provide little or no downside protection when the stock market is declining.

Breach of Fiduciary Duty

A broker is an individual that arranges a contract between a buyer and seller in return for a commission. Brokers coordinate contracts for property that they do not possess and do not have a personal interest. The property can be real estate, mortgages, insurance, stocks, bonds, and commodities. The most common types of brokers are securities brokers, commodities brokers, real estate brokers, mortgage brokers, and insurance brokers. Regardless of a brokers’ specialty, he or she must adhere to moral and financial legalities or risk committing broker fraud.

Churning and Excessive Trading

Churning in stock accounts is a form of investment fraud that involves the excessive transaction of your investment account’s securities by your broker without regard for your financial objectives in order to generate commissions.

Failure to Supervise

Investment firms have a responsibility to establish and maintain rules regarding the supervision of their registered financial advisors and brokers. The supervision includes regular reviews of your portfolio to ensure it meets your investment objectives and risk tolerance. Broker-dealers are required to contact you in response to red flags to ensure you understand the risks involved with your holdings or trading strategy. If your investments lost money due to a representative’s negligent or fraudulent behavior and the firm’s failure to supervise played a role, our lawyers may be able to help you recover your losses.

Investment Fraud and Misconduct

Many investors fall prey to the unethical practices of brokers who put their own interests above those of their clients. Common fraudulent investment products and scams include:

  • Non-Traded Real Estate Investment Trusts (REITs): investors in non-traded REITs must rely on disclosures made by the sponsor of the REIT while paying high commissions. These investments are illiquid, expense, and often underperform compared to REITs traded on an open exchange.
  • Junk Bonds: junk bonds are rated below investment grade by S&P and Moody’s. They carry a high risk of default and are not suitable for investors seeking stable investments.
  • Ponzi Schemes: these schemes promise high returns, but use money from new investors to pay earlier investors.
  • Structured Notes: a hybrid security product that generally includes a stock or bond plus a derivative. They may include hidden costs and are often riskier than promised to investors.
  • Variable annuities: investors pay high commissions and costs for these products with high penalties for liquidating. They are often not suitable for the elderly investors to whom they are recommended.

Margin Trading

Margin trading is a practice in which a financial advisor recommends an investor purchase stocks by borrowing money from a broker-dealer using securities that are already owned as collateral. Brokers sometimes recommend margin accounts as a way to generate commissions without an additional up-front investment from their customers, despite the fact that margin trading is a high-risk strategy that is not in the best interests of many investors.

Broker Misrepresentation or Omissions

The fundamental principle of both federal and state securities laws is complete disclosure of material risks and conflicts of interests. Many investors rely on information and recommendations from their financial advisors or brokers before approving securities transactions. The misrepresentation or omission of material information regarding an investment that results in losses may be considered a breach of fiduciary duty, and victims of this form of investment fraud may be able to recover their losses.

Overconcentration of Assets

One of the fundamental principles of investing is the diversification of funds across different asset classes and market sectors to minimize the risk for losses without sacrificing returns. Often, concentrated portfolios are not easy to identify because the portfolio may have several mutual funds or dozens of holdings. Registered brokers and financial advisors have an obligation to know certain essential facts about individual investors in order to make appropriate recommendations and provide investors with the information they need to make informed decisions. These details include an investor’s age, investment risk tolerance and financial status.

Preferred Securities

In times of market crisis, similar to what we are now experiencing, most preferred securities act more like common stock than fixed income.  As a result, preferred securities miss the upward price appreciation that common stocks enjoy but are exposed to the downward declines.  These investments that are traditionally thought of as income-producing vehicles have lost significant value, performing far below their income generating alternatives.

REIT Issues

A REIT is an entity that owns and operates income-producing real estate and distributes the income to investors. REITs pool the capital of numerous investors to purchase a portfolio of properties which the typical investor might not be able to buy individually. To qualify as a REIT, a company must have most of its assets and income tied to a real estate investment and must distribute at least 90% of its taxable income to shareholders annually in the form of dividends. Investors depend on the sale of properties or listing for the return of their principal.

Selling Away

Selling away occurs when a broker or other registered financial advisor sells or solicits the sale of private securities not approved by the investment firm for which he or she works. Selling away is a breach of fiduciary duty that often results in substantial losses for innocent investors.

Unauthorized Trading

Unauthorized trading is a common form of investment fraud in which a financial advisor or broker makes transactions via your nondiscretionary investment account without your explicit permission. Unauthorized trading often involves the practice of churning, in which a broker engages in an excessive level of transactions through a customer’s account. This generates substantial commissions for financial advisors and brokers, but it also costs investors.

Variable Annuity Issues

Variable annuities are often recommended by investment advisors and brokers as a secure element of your retirement plan. Yet they are not suitable for many consumers, particularly elderly investors, and are sometimes sold against clients’ best interests. Annuities pay some of the highest commissions in the securities markets, the annual costs can exceed 3%, and there are very high penalties for liquidating.

Arbitration v. Mediation

Arbitration and mediation are two distinct ways of resolving securities disputes between and among investors, brokerage firms, and individual brokers. Mediation and arbitration are both forms of “Alternative Dispute Resolution” that may offer a prompt and inexpensive way of resolving disputes.

Investors can file an arbitration claim through FINRA (or another arbitration forum) when they have a dispute involving their brokerage firm or financial advisor. Nearly all brokerage firms require clients to sign arbitration agreements that limit investors’ rights to file claims in court. Most arbitration disputes are resolved through settlement, often through conducting a mediation with a neutral mediator to aid in the negotiation of the claim.

If you want to recover damages or losses, filing an arbitration case offers you a way to seek recovery.