Birmingham Investment Lawyers Combat Investment Negligence
Helping our Alabama clients recoup their losses from questionable investments
Navigating securities investments without the assistance of a financial advisor or broker can be challenging, or even unadvisable if the investor lacks market experience. Due to this lack of experience, many people hire a broker to assist them. Clients place a large amount of trust in brokers and investment firms to guide them appropriately. Because of competing interests or a general lack of due diligence, this trust is sometimes broken, resulting in substantial losses for the client.
The Frankowski Firm helps clients to be more informed about investment fraud and negligence, and of their rights when they have been misguided. By educating the financial community, including both small and large scale investors, we aim for a more transparent and fair industry as a whole. Our Birmingham investment negligence attorneys work hard to help investors recover their lost savings and hold bad brokers and brokerage firms responsible for their wrongdoing.
What kinds of investments are prone to fraud or negligence?
Some examples of claims that an Alabama investment negligence lawyers at The Frankowski Firm have handled include:
- Unsuitable margin trading. In margin trading, the client pays only a percentage of the price of an investment, borrowing the remainder of the cost from the investment firm. This scenario is usually more advantageous for the firm than it is for the client, as the firm makes money on these investments both through commissions and through interest on the loan to the client. The use of margin also increases the leverage in an investment which will increase the investor’s losses if the investment declines in value.
- Private placement investments. Because they are not registered with the SEC, and because they are not traded publicly, private placement investments present many risks. Brokers are required to provide as many details about the investment as possible in the form of a Private Placement Memorandum (PPM) to the client.
- Master limited partnerships (MLPs). Although they often initially perform well, the long-term yield of MLP investments tends to be more unpredictable. Because they are typically invested in the energy and natural resource field, MLPs are highly volatile and subject to foreign and domestic economies, resources, and other factors.
- Variable annuities. These investments, which involve investing a lump sum of money that is paid upfront, can be attractive because they promise ongoing payments from an insurance company at designated intervals. However, these investments are illiquid, involve high surrender charges, and can have many hidden fees associated with them.
- Real Estate Investment Trusts often do not disclose past performance, fees, taxations schedules, and redemption restrictions. As a result of this lack of disclosure and transparency, many investors never fully understand the true risks of REITS and lose substantial amounts of money by investing in a product they don’t understand.
- Mutual funds. Mutual funds are generally seen as innocuous and low risk investments. The data paints a very different picture, demonstrating that most mutual funds perform worse than low-cost index funds–even over multiple years of analysis. The reasons vary, but the reality is that mutual funds are far from a sure bet.
- Closed end funds. Like other questionable investments, closed end funds are risky due to the lack of disclosure of various policies, particularly the frequency of payments, and the portion paid out in fees and expenses. Depending on the management of a closed end fund, the risk profile and returns can vary wildly, and unwary investors can easily lose money while their broker earns it.
- Penny stocks. Based on the low buy-in cost, many assume that penny stocks are a safer form of investing. Even though the initial cost may indeed be low, the associated risks are still great, particularly given the lack of publicly available information and lack of history and liquidity.
Because of the fluctuating nature of markets and economies, any investment can see a gain or loss. However, when you are subject to substantial loss after following the guidance of your financial advisor, he/she or the firm may be liable.
Birmingham investment fraud attorneys protect and serve investors
Markets are unpredictable, but when it comes to losses on investments, negligence or fraud on the part of investment professionals is often at play. Trustworthy Birmingham investment negligence attorneys at The Frankowski Firm are your advocate in obtaining just compensation for your losses. If you or a loved one have been misled by a broker or investment firm, call our firm at 888.741.7503 or fill out our contact form to discuss your legal options.