Stockbroker theft or conversion occurs when a broker misappropriates a customer’s securities or funds for their own use, without the customer’s permission. The theft can happen in many different ways. Brokers and financial advisors often use sophisticated tactics to conceal their misconduct. No matter how it occurs, 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.
What is Broker Theft By Conversion?
Conversion is a type of theft in which the stockbroker has lawful control over the property or funds of another party, but “converts” the property or funds for the stockbroker’s own use. Theft by conversion typically involves a broker using their control over an investor’s account to embezzle financial assets from the client. Unsophisticated investors and elderly investors are common targets.
Examples of broker theft by conversion include the following:
- Forging letters of authorization to transfer funds from the customer’s account to another account controlled by the broker.
- “Borrowing” money from the customer’s 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 customer as joint account holders, then using the account to siphon funds from the customer’s real account.
- Recommending investments that, unbeknownst to the investor, the broker controls or benefits from.
- Recommending non-existent securities or funds.
- Convincing a client to invest in a Ponzi scheme.
Brokers may go to great lengths to conceal the theft from their clients. They might change the customer’s address and other information, reroute statements from reaching the customer, or produce fake statements.
To avoid being a victim of stockbroker theft, make sure to routinely monitor your investment account and the value of your portfolio. Missing funds, excessive fees, unauthorized transactions, transfers to other accounts, and statements that omit detailed investment information could all be signs of broker conversion or other misconduct.
Recovering Theft By Conversion Investment Losses
FINRA Rule 2150 prohibits improper use of a customer’s securities or funds. FINRA’s supervision rules also require brokerage firms to establish and maintain a system to supervise brokers. Both the broker and the firm may face liability for theft by conversion. The attorneys at the Morgan & Morgan Business Trial Group often represent investors who are victims of theft in FINRA arbitrations or in court.
The Business Trial Group’s stockbroker fraud attorneys have the skill, experience, and resources needed to handle the most complex investor disputes. We represent investors on a contingency-fee basis. You pay no fees at all unless we recover money for you.
To discuss a potential theft by conversion claim with an attorney, free of charge, please submit a claim review form.