Outright theft by your stockbroker can happen.
Stockbroker theft occurs when a broker misappropriates (i.e., steals) a customer’s securities or funds for their own use, without the customer’s permission. This is also known as unlawful conversion. An intentional misappropriation or conversion of funds directly violates FINRA Rule 2150, which prohibits improper use of a customer’s securities or funds, as well as applicable state laws.
FINRA’s supervision rules require brokerage firms to establish and maintain an adequate system to supervise brokers. Both the broker and the firm may face liability for theft by conversion.
Every year, FINRA bans hundreds of brokers for bad behavior, including for theft and conversion. In 2019, the regulator barred 348 individuals. Barred brokers are permanently prohibited from associating with any FINRA member firm in any capacity.
In 2019, FINRA barred a former Ameritas Investment Group broker after he was fired for using client funds for personal use and then refused to provide testimony after FINRA opened an investigation. According to reports, this broker has been accused of stealing nearly $1 million from two clients, as well as using client funds intended for insurance policies to buy real estate for himself.
This is just one example of how brokers can take advantage of you and your money. No matter how it happens, theft by conversion is illegal, and both the broker and his employer-firm may be held liable.
Did your broker steal, convert, or misappropriate your funds? Our stockbroker fraud lawyers can help recover your losses.
Examples of Stockbroker Theft And Conversion
Conversion is a type of theft in which the stockbroker has lawful control over your property or funds, but “converts” the property or funds for their own use. In other words, the broker may use his or her control over your investment account to embezzle financial assets.
Examples of broker theft by conversion include the following:
- Forging letters of authorization to transfer funds from your account to another account controlled by the broker.
- “Borrowing” money from your account in exchange for an “IOU” or promissory note that is never paid back.
- Opening an unauthorized account at another institution that lists the broker and you as joint account holders, then using the account to siphon funds from your real account.
- Recommending investments that, unbeknownst to the investor, the broker controls or benefits from.
- Recommending non-existent securities or funds.
- Convincing you to invest in a Ponzi scheme that the broker is participating in.
Brokers may go to great lengths to conceal their theft, including changing your address and other information, rerouting statements from reaching you, or producing fake statements.
Often, brokers who engage in misconduct are repeat offenders. You can check your broker’s disciplinary history using the FINRA Broker Check tool.
Recovery of Losses Due to Broker Theft
Our stockbroker fraud attorneys have the skill, experience, and resources needed to handle the most complex investor disputes.
If you have lost money because your broker stole your money or committed other fraud, the securities attorneys with Morgan & Morgan’s Business Trial Group are here to help.
The Business Trial Group is part of the largest contingency law firm in the nation, with 700 lawyers and offices across the country. Our attorneys often represent investors who are victims of theft in FINRA arbitrations or in court, and we do so on a contingency-fee basis. This means you pay no fees at all unless we recover money for you.
To discuss a theft claim with an attorney, free of charge, please contact us today.