How do I know if I’ve been the victim of investment fraud?
Several red flags can signal fraud or negligence by an investment professional, including:
- Large purchases or exchanges of annuity or insurance products
- Investments in companies you have never heard of, or in alternative investments not suited for unsophisticated investors
- Losses significantly greater than those of your peers with similar risk tolerance and objectives
- Receiving trade notices for unfamiliar or unauthorized transactions
- Communication with your advisor via text message
- Inability to sell your investments
These are the most common signs, but others can exist.
What should I do if my financial advisor made overly risky or unauthorized trades?
- Review the paperwork completed when you opened your account, particularly the section outlining your risk tolerance and whether your advisor had discretionary trading authority.
- Gather your trade confirmations to check if trades are marked as “solicited” or “unsolicited.”
- Contact a lawyer.
How long does it take to recover lost funds?
Recovery time depends on who is responsible.
Most disputes in the financial services industry are resolved through arbitration, which is typically faster than court proceedings. Most arbitration cases are resolved within approximately nine months.
Can I recover money lost in a Ponzi scheme?
Yes. Investment firms are generally required to have procedures in place to prevent Ponzi-type investments. Proper policies detect almost all such schemes.
Why would an advisor intentionally invest me in something inappropriate?
Advisors can earn commissions up to 30 times greater from illiquid or high-risk investments than from traditional investments.
For example:
- Blue-chip stocks or commercial-grade bonds often generate commissions of less than 0.5%.
- Life insurance, annuities, alternative investments, or thinly traded stocks can generate commissions as high as 15%.
You may also incur higher costs if margin loans or securities-backed lines of credit are recommended, even when your advisor is already earning a management fee.
What is the difference between advisor misconduct and poor investment performance?
Advisors must understand your financial goals and risk tolerance and recommend investments consistent with them.
If you are retired, rely on your portfolio for income, or cannot tolerate major fluctuations, your investments should reflect that stability.
Is an alternative investment appropriate if I told my advisor I could not tolerate market volatility?
No.
Alternative investments—such as non-traded REITs, business development companies, hedge funds, and private equity funds—can be as risky or riskier than the stock market.
They often lack transparency, have limited liquidity, and pay high commissions to advisors, creating conflicts of interest.
Why is switching or exchanging life insurance or annuities bad?
Exchanging policies typically harms investors because:
- Upfront charges are lost
- New charges and liquidity periods are incurred
- Advisors collect new, often substantial commissions
While some states have rules to protect against this, exchanging policies rarely benefits investors compared to the costs involved.
An experienced attorney can help determine if you were improperly advised.
How much does it cost to hire you?
Most cases are handled on a contingency basis, meaning attorney fees are a percentage of the amount recovered. If there is a securities fraud claim, we can seek reimbursement for attorney fees regardless of whether we file through FINRA arbitration or with the courts.
How long do I have to file a claim after discovering fraud or negligence?
It depends on the nature of the claim and whether arbitration is required.
To preserve your rights, contact an attorney as soon as you suspect wrongdoing.
What kinds of investments are most often involved in fraud cases?
While fraud can occur in many types of investments, it most commonly involves:
- Indexed life insurance
- Annuities
- Non-traded REITs
- Margin accounts
- Alternative investments
- Leveraged ETFs
Will you personally handle my case?
Yes. Jeff Pederson is personally involved in every step of every case we accept.
What should I bring to my free consultation?
Please bring:
- All documents received from your advisor when opening your account
- A current account statement showing your holdings in the investments in question
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