Securities litigation is often the result of particular and potentially illegal circumstances where investors lose money in their investments. While risks of significant gains and losses are always a possibility, legal action becomes important when alleged wrongful acts affect investors’ bottom lines.
Accusations against individuals and entire firms are serious. Significant amounts of money, if not reputations and livelihoods, are on the line if a financial professional or firm faces legal action against a client or government entity.
Breach of fiduciary duty
The primary tenet of any stockbroker is to maintain the highest standards when it comes to their fiduciary duty. Being in a position of trust mandates loyalty and fidelity. Accusations of violating that confidence in any way could have financial consequences for their clientele, resulting in careers and entire entities coming to a sudden end.
Conflict of interest
Perhaps the most high-profile facets of securities litigation with what seems to be unprecedented media coverage. Complex in nature, conflicts of interest occur when a firm is accused of playing both sides, specifically work in investment banking while “dabbling” in stock analysis/brokerage. Analysts may be biased in their evaluation of stocks for clients in investment banking.
Insider trading results from an individual possessing knowledge about a company’s inner workings – brokers, stock analysts, and investment bankers – and purchasing stock. Media coverage in the 1980s put a bright spotlight on the illegal practice when Ivan Boesky, a prominent stockbroker, became the “face” of insider trading as major investment banks purportedly tipped him off on pending corporate takeovers.
Ineptitude and malpractice
While many other facets of securities litigation involve people enriching themselves, malpractice involves deliberate steps to inflict harm on victims that results in regrettable investment choices leading to significant financial losses. While individual stockbrokers are the focus of investigations and criminal proceedings, securities firms that hire them may also be held accountable.
As with any aspect of the law, accusations alone should not be career-ending. Experienced legal counsel can mean the difference between vindication and a career-ending ruling.